GOP thrust to stop transfers between Social Security funds may open a path for new progressive benefits’ improvement

We learned today that there is too much money in the Social Security retirement fund and not enough money in the Social Security disability fund, so the Republican-dominated Congress seems determined to prevent transfers from the “rich” fund to the “poor” fund, allowing both to last until 2033. Otherwise, the disability fund would run out of money next year and the retirement fund would last, well, a lot longer than to 2033.

In the past this transfer was routine for Clinton or Reagan era congressfolks, but the GOP now sees a philosophical issue in this take from rich, give to poor, solution. Ignored is the fact that the past transfers caused a public impression of underfunding of the retirement fund, helped sell naive politicians on raising the retirement age, cutting payments and income taxing as much as 85% of earned benefits – all to the delight of the Paul Ryans of the past.

I think the Republicans are right, but not for some Ayn Randian ideal corruption, but because we are confusing the public, when we raise enough money for retirement payouts on one hand, use some of the money for something else (disability), and then come back in the annual budget battle and proclaim “entitlements (Social Security) must be reformed” because the fund is running out of money in 2033.

A good business owner with two stores, one that makes a fortune and the other that loses a lot, will often take profits from the richer operation to fund the poor one. This is usually temporary, a stopgap until the poor store lowers expenses or increases revenues. In no case would anyone with brains declare that both stores are unprofitable and going broke, when the profits of one are transferred to the other.

The disability fund needs more money. Republicans don’t want to raise the income cap of $117k or hike FICA tax rates. Their solution, as usual, is to cut benefits next year or soon, so the books balance. In this exercise they appear to agree that disability is not retirement, and perhaps some in Congress have seen the light that extra taxes on working people to pay for disability (often even caused by careless employers) is like asking the lobster to heat up the water.

Our Social Security retirement benefit structure, already deeply regressive, should not support disability payments. Revenue to balance the disability coffers should come from general funds, like SSI does, and should be considered part of the public welfare safety net. At the same time Social Security retirement should be recognized as a benefit based on contributions, which it is not at present (the lowest paid beneficiaries receive 90% of prior earnings, the middle – 50%, and the top middle class – just 15%).

In a country not divided by fractional media and political coercion, the public would ask for a fair distribution of retirement benefits, that did not punish the workers, who contributed the most. It would also demand that if additional taxes are needed to balance our disability fund, perhaps new taxes are required of the rich, particularly those who do not pay FICA taxes above $117,000, corporations, or those blessed hedge fund managers who get away with 20% income tax and no FICA contributions.