May 15, 2005


Democrat Readies Plan on Social Security: Bucking party leaders, the Floridian proposes a tax increase on wages above $90,000. (Joel Havemann, May 15, 2005, LA Times)

In new political maneuvering over Social Security, a Democratic lawmaker says he will introduce a plan Monday for shoring up the finances of the retirement system, putting him at odds with leaders of his party.

Rep. Robert Wexler (D-Fla.) says that by imposing a 6% tax on wages above $90,000, to be paid half by workers and half by employers, the government could raise enough money to solve Social Security's financial problems for 75 years.

Workers and employers pay a combined 12.4% Social Security tax on wages up to $90,000 a year, but none on amounts above that.

In proposing the idea, Wexler has drawn praise from the White House but criticism from some in his party.

President Bush has made restructuring Social Security the top domestic priority of his second term, and he has urged lawmakers to engage in the debate.

But Democratic leaders have said they do not want to lay ideas on the table until Bush abandons the centerpiece of his own plan — allowing younger workers to divert some Social Security taxes into individually controlled stock and bond accounts. Democrats say the accounts would drain money from the system, causing it further harm.

In an interview, Wexler said he was acting out of duty to his Florida district, which he said included the second-highest number of seniors of any House district. It includes parts of Palm Beach and Broward counties.

"My allegiance to seniors is greater than my allegiance to the Democratic leadership," Wexler said. "The president has challenged Democrats to come up with plans of their own for dealing with Social Security's solvency. I think it's time we met that challenge without cutting benefits or raising the retirement age."

Aides to the top House Democrat and the Senate Democratic leader predicted that Wexler would not draw much support from others in the party.

"He's a party of one on this," said Jim Manley, spokesman for Senate Minority Leader Harry Reid (D-Nev.).

Jennifer Crider, press secretary to House Minority Leader Nancy Pelosi (D-San Francisco), said, "This is not the Democratic plan."

It'll be the only Democratic plan for now, and a straight tax increase at that.

Posted by Orrin Judd at May 15, 2005 9:46 AM

Typical Democrat plan. Raise taxes, do nothing to actually, you know, solve the problem. Or even address the problem.

SS inflow is currently greater than the outflow, so all this would do is increase the amount of money that goes into the general fund (via the money-laundering of the "trust fund" and special T-bulls) to be spent immediately.

Posted by: ray at May 15, 2005 11:33 AM

Not wanting to raise the age of retirement ignores the second-largest reason that SS is in trouble: Increasing longevity.

In the future, if we leave the retirement age for GenX at 67, we're likely to have a situation where the average worker pays into the system for 45 years, and then draws retirement for 20 years.
If the pension payments are expected to fully support the retired worker, instead of merely supplementing other savings, then for SS to remain solvent the worker would have to pay annual taxes equivalent to five months' pension payouts.
That is a hefty burden, and for younger workers to shoulder that load while also making up for the Boomers' shortfall seems to me to be essentially impossible.

Speaking of the Boomers' shortfall...
For those born between 1943 and 1954, the age of retirement is 66. Then, for every year thereafter that one was born, the age of retirement increases by two months per year, until 1960, when the age of retirement is capped at 67.

It would be prudent, and not too burdensome, to immediately raise the retirement age by one additional month for every year after 1943 that one was born in, with the retirement age capped at age 68 for those born in 1959 or later years.

Posted by: Michael Herdegen at May 15, 2005 12:44 PM


I'm 58 years old (born in 1946). Looking at my Social Security Statement, it says:

At age 62, your payment would be about ... $1,098
a month

If I had kept working until age 66 it would be ... $1,456 a month

Working until age 70 ... $1,922 a month

My birthday is in Nov., so I'll have 3 years from then until I plan on collecting. By the way, I quit/retired from my job when I was 52, and haven't paid anything since 1999 into Social Security. I hope I live a long, long time. At least that's the plan.

Posted by: AllenS at May 15, 2005 1:05 PM


For most people retiring in the next decade, assuming that they can afford the reduced benefit, taking early retirement is the way to go.
Waiting another eight years to get the enhanced benefit would only make sense if one believed that the SS retirement system was capable of paying that benefit for another few decades, which seems to me to be exceedingly improbable.

Posted by: Michael Herdegen at May 15, 2005 1:26 PM

A tax increase on middle-income taxpayers, yeah that's the ticket. Oh, here's my wife, Morgan Fairchild.

Lots of folks in Wexler's district make over $90,000 per.

Posted by: bart at May 15, 2005 3:05 PM

Wexler's district will be dead, this is intergenerational and class warfare.

Posted by: Sandy P. at May 15, 2005 3:22 PM

Bush admin should be smiling at this. Either the Dems don't come up with a plan or their first plan is a tax increase.

If Bush can get private accounts, the retirement age raised, and shifting more of the burden from the lowest paid workers to more well off workers then the reform should be successful.

Posted by: AWW at May 15, 2005 3:40 PM

If employers have the money sitting around to pay half, why not make them pay it all?

Why not have them pay for people who don't work for them too?

Workers need every dime they make. Let employers foot the bill for everything.

Posted by: David at May 15, 2005 4:31 PM

Wexler's mistake is in actually coming forward with the default plan the Democrats want while there's still a chance for an alternative option. If they had their way, any action on Social Security would be put off for 5-10 years, until Democrats (with help from the big media outlets) could spin the whole thing in the media as a major immanent crisis with no other solution but to raise taxes or risk default.

Posted by: John at May 15, 2005 8:23 PM

Sounds just like the "lift the cap" plan a certain junior Republican senator mooted a few months ago.

Posted by: Random Lawyer at May 16, 2005 2:33 PM