I still believe that it is in the best interests of the United States of America to see the Republican Party relegated to the ash-heap of history. The fact that the Republican Party is riddled with demagogues, moral degenerates, wannabe spies, torture afficionados, traitors, incompetents, toadies, psychotics in need of supervision, and patrons of terrorists and death squads leads me to believe that the one-time Party of Lincoln has become in need of dissolution.
However, every now and then, somebody in that party actually does some number crunching, takes Bob Dylan's advice from Subterrainian Homesick Blues, and actually makes a pronouncement worth considering.
Such a person is Lindsey Graham, who seems to be making a proposal that echoes in part how I would have Social Securty as we know it funded well.
This week, Graham claimed to have found one solution to the problem of paying for the transition from the current pay-as-you-go system to a personal accounts system. Graham would raise the “cap” on earned income that is subject to the 6.2 percent Social Security tax. Currently the first $90,000 of a worker’s earned income is taxed.
Graham touted the idea of a “donut hole” in the Social Security tax. Graham hasn’t worked out exact numbers yet. But as a purely hypothetical example, the Social Security tax would apply to the first $90,000 of income, the next several thousands of dollars of income would be exempt, but then the tax would resume on all income above $300,000.
The “donut hole” would let upper-middle class Americans off the hook, yet would force higher-income people to help pay the cost of transitioning to private accounts.
Actually, once you make those changes, you don't really need "private accounts" and their attendent risk, because this would "save" Social Security in and of itself. But, to be honest, I could live with private accounts in addition to the traditional payroll based annuity/income insurance program if this method of funding was used to shore up said annuity/income insurance prgram.
It also has the added benefit of making sure heavy earners of unearned income are performing their civic duty by ensuring social stability.
But give Graham a star for coming up with a plan that, at least before the numbers are crunched, looks progressive, as long as there's no devil in the details.
Oh, one other thing: the donut's good because it represents Christmas spending.
Yep, that's what folks who are in the upper 35% do with their excess income after Social Security maxes out. They buy Christmas presents. They stimulate the economy.
This hole is interesting, because it on the surface might appear to split middle class people, but to be honest, as somebody who already maxes out, it's not a bad thing to have middle class people max out Social Security if it's made up by really high earners of unearned income.