As a man who recognizes that free markets are not perfect, but are the best system yet devised by man to discourage sloth and reward industry, I have been almost put into shock by the direction of the United States financial system over the past six months and our supposed government solutions. Our country is in a panic and those elected officials who bend toward socialism are seeing a golden opportunity to grab more power for themselves.
I am not going to use this post to explain why 825 billion dollars in more government spending will not create jobs or to explain how taking money from tax payers, filtering it through the Washington bureaucracy, and then giving part of it back to various groups or industries subject to the whim of Congress is a bad idea. I am not even going to detail the millions of dollars worth of pork present in the current bill that does not encourage the employers to fill one private sector market-driven job. You can read about the pork in other places. I recommend starting here.
Fortunately, we have at least one Republican (conservative) who plans to oppose the bill. Idealy, as a fiscal conservative, I would prefer that we shut down almost all domestic federal spending and cut taxes . . . but that isn’t going to happen with liberals in charge. Therefore, being a powerful, influential member of the press, I want to propose a compromise.
Let’s cut social security.
The Obama stimulus package is going to cost close to $850 billion up front and will become $1.3 trillion by the time the interest accrues when supposedly pay off this debt. Every person in the Unites States who earns a paycheck, currently sends 12.4% of his gross income to social security, up to $90,000 in annual salary. Full-time employees pay 6.2% and employers pay the other half. Self-employed workers pay the entire 12.4% of gross income. My proposal is to cut the social security tax in half for 2009 and 2010. There are several ways to reduce this tax – remove the employee obligation, remove the employer obligation, or simply cut each contribution in half.
Many will then ask, what about those who are currently receiving benefits from social security? Will the government have enough money to cover those commitments? Well, 2009 projected Social Security revenue for the Federal Government is close to $950 billion dollars. The United States is projected to send $650 billion in benefits to social security recipients in 2009. If we cut social security revenue by half, we are left with a $175 billion shortfall in 2009 and while the numbers will change slightly, a similar shortfall in 2010.
I propose that instead of spending $850 billion to $1.3 trillion of new debt on projects that may or may not stimulate the economy, and whose usefulness or value will be hotly contested, why not use that debt to finance a $175 billion dollar shortfall in social security and give every person who earns income a tax break?
Liberals could not portray this as a “tax cut for the rich”, because people who make over $90,000 annually will only get a tax reduction of $5,580. Chump change for a millionaire or multi-millionaire. Furthermore, everyone, even minimum wage earners pay the social security tax. Conservatives would get a tax cut that truly supports business and decreases government dependency.
Businesses would benefit from the added capitol. Some businesses would actually double their profit margin, depending on the industry and how the percentages are divided. Employers would have the freedom to give pay increases or invest more in infrastructure. They could pay down debt or even pocket the difference. A reduction in overhead could help many employers save jobs. An employer with a $1 million payroll, would have approximately $62,000 in extra capital to work with.
Everyone making less than $90,000 annually would get a 3.1 to 6.2 percent take-home pay increase – with no added burden on their employers. Employees with a sudden pay increase could pay down debt, invest more for the future, or simply save more money from each paycheck. The added money in the system – spending, saving, investing – would help to thaw the credit markets and the Fed would not have to print more money and drive down the value of our currency.
Anybody have a better idea?