Small Business Reading Room

Tuesday, June 14, 2005

Commentary from the CATO Institute on Social Security Reform

Since it looks like the Democratic Party in America is going to kill any attempt to reform Social Security, I thought it would be interesting to examine thier motives. I don't have any affirmative answers, but this is enlightening.

A quote from the CATO Institutes' Brooke Oberwetter that originally appeared in Reason Online on June 13, 2005:

As it has evolved, Social Security has attempted to provide American workers and their families with three things: retirement benefits, disability insurance, and survivor benefits. Those are solid liberal goals. But because of the program's age, aspects of Social Security discriminate against many modern families, particularly gay couples, unmarried couples, dual-earner couples, and divorcees.

Fully one-third of all marriages end before the 10 years necessary for spousal benefit eligibility—among blacks, nearly a half of all marriages end in divorce within 10 years. Considering that many women take time off from work to raise children during those first 10 years, they are unable to make Social Security contributions of their own yet not eligible for spousal benefits upon divorce. Women who do remain married beyond the eligibility period but divorce later not only have a lower earnings record (if they raised children) but are forever tied to the earnings of their ex-husbands and are ineligible to receive the possibly higher benefits available from a subsequent marriage that doesn't last a full 10 years—this feature can be particularly harmful to older Americans who wish to marry.

Even on the rosier side of marriage and commitment, Social Security discriminates. Dual earning couples, for example, often end up subsidizing the benefits of single-earner families. This is because workers are entitled to either their own benefits or the equivalent of one-half the benefits of a higher earning spouse—but not both. Women who work for a number of years but who would do better by accepting one-half of their husbands' benefit level don't see any increased benefits for their payroll taxes; those women lose the 12.4 percent of income that was taken from them during their working years. The money goes to subsidize the benefits of a single-earner couple.

Consider also the bias against couples who for whatever reason are unmarried. Gay couples and heterosexual co-habiting couples are unable to share the benefits of their status as workers protected by the Social Security system. An unmarried couple that has decided on a single-earner structure cannot take advantage of survivor's benefits or spousal retirement benefits in the same way a government sanctioned married couple can.

The overwhelming support for the status quo from the political left is shocking, and should be appalling to members of the Democratic Party or anyone who holds the liberal values that Wexler extols. Bringing the system into solvency through tax hikes on labor and productivity will do untold damage to America's economic growth in order to protect a system that systematically discriminates against core constituencies of the Democratic Party, a system that disproportionately benefits white women who have never worked a day in their lives over all other groups. Is that a status quo that the Democratic Party wants to be associated with?

While the Democrats demand that Social Security's current structure be maintained through plans like Wexler's, millions of women remain tied to their husbands' earnings and millions of non-traditional families are denied access to the system. It doesn't seem out of line to ask, why aren't the Democrats taking the lead on transforming one of America's most discriminatory programs into a program that treats individuals as equals?


Post a Comment

link to Atom Feed




Delaware Intercorp, Inc.
113 Barksdale Professional center
Newark, DE 19711-3258

"For all the best reasons to incorporate,the best place
is Delaware and the best incorporator is
Delaware Intercorp!"

Call Monday - Friday 09:00 (am) - 17:00 (pm) Eastern Time (GMT-05:00)

Toll Free - USA only - 888.324.1817
International: (1) 302.266.9367
FAX: 302.266.9940