Sunday, August 12, 2012

Redistribution of wealth to workers from corporate executives saves Social Security

Dean Baker explains something that is really not well understood. If we had increased wage growth, it would do a lot to lower the projected shortfall twenty five years from now in Social Security.

Workers pay more in payroll taxes than rich folks who rely for most of their income in investments, which are not part of the payroll tax.

Put a lot of money in workers' hands and more payroll taxes roll into Social Security, and for that matter, Medicare.

It is also true that if the GDP grows, then Social Security's projected shortfall in 2037 also is lessened. If GDP grew as it did during the 1960s and 1970s, then the shortfall would disappear in its entirety.

This is all why attacking Social Security or wanting to "reform" it is looking through the telescope from the wrong end. The problem of a projected shortfall with Social Security is a symptom of the larger economic decline of the middle class. However, the way it is discussed in broadcast corporate media is that it is a cause of decline of the American middle class.

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