Social Security Is Not Regressive

To The Editor:

Your editorial regarding Mr. Greenspan, which suggests it is time for him to get out “while at the top of his game,” has so many inaccuracies and distortions as to suggest that you already missed the chance to follow your own advice. You speak of “the recklessness with which we have gone from a multi-trillion dollar surplus situation to one where deficits keep accumulating.” Given your position as editor of National Underwriter, I think it is pretty reckless to make statements that misrepresent the facts in such a way.

First, we never had a “multi-trillion dollar surplus.” A quick check of the Congressional Budget Office Web site shows that our annual surplus peaked at $236 billion dollars in 2000. Of that total, $151 billion came from the Social Security system, which meant it wasnt true surplus but a down payment on future obligations.

Could you get to a “multi-trillion dollar surplus” by projecting for many years into the future? Possibly, but you didnt say that is what you had done, and a projection of that kind (clearly) wouldnt be worth the paper it was written on. Instead, you implied that we had gone from a multi-trillion dollar annual surplus to a deficit in a few short years because of tax cuts. What you failed to even “touch on lightly” (to use your words) were the spending increases, including those brought on by the war on terror, which contribute to our economic situation. Also left out were the tax revenue reductions that come not from tax cuts but negative changes in our economy.

Second, and more significant given that this is an insurance publication and you are its editor, your taking Mr. Greenspan to task regarding Social Security shows a significant lack of knowledge on your part. Didnt the fact that he was “hailed as a visionary man of courage” for his comments make you pause and think about your perceptions in this area?

You state, “Its no secret that the Social Security tax is quite regressive.” People with your position within the industry should be the ones correcting this misconception rather than propagating it. Websters defines regressive as “decreasing in rate as the base increases.” Last I looked the Social Security tax was flat, which means every dollar of taxed income is taxed at the same rate.

Rather than being regressive, Social Security is quite progressive when the benefits are factored in. A higher income individual could pay twice as much tax as a lower income person, yet receive a monthly income benefit that is only 40% higher. This is hardly regressive. But thats only half the story, as higher income Social Security recipients get to pay taxes on up to one-half of their benefit, while lower income recipients may escape taxation entirely. At a 28% marginal tax rate, Mr. High Income has now paid twice as much tax for a whopping 20% more benefit.

You close by commenting that Social Security benefit reductions are tax increases of a sort and that Mr. Greenspan should explain why this tax increase is acceptable, but others pose significant risks. On this you miss the point. This “tax increase” is necessary precisely because the issue does pose significant risks. If we dont get Social Security taxes and benefits in proper alignment, fully reflecting the intergenerational demographic issues that exist, the fiscal gaps of today will look tiny in comparison to those we will face in the future.

If you are going to write editorials on issues as significant as Social Security, take advantage of the fact that our industry has many people who can help you understand the facts. Dont be taken in by, and then propagate, the myths that others foster for their own political gain.

Chris Nickele

Editors note: Multi-trillion dollar surpluses may not have accumulated, but the commonly accepted scenario going forward from the late 90s was that cumulative surpluses would amount to trillions of dollars. This was acknowledged by both political parties and the Congressional Budget Office. Indeed, it was the very likelihood of such budget surpluses amounting to trillions of dollars that President Bush used as the basis for his first tax cut. Clearly, someone thought the projection was “worth the paper it was written on.”

Opinion Belonged In The Village Voice

To The Editor:

Your March 15 editorial recommended that Alan Greenspan resign as chairman of the Federal Reserve Board for what seemed to be 2 reasons: (1) he suggested that the shortfalls in our Social Security system and the deficits in our budget should be kept in check through controls in spending, and (2) he did not properly castigate President Bush for cutting taxes for the wealthy, nor did he support necessary tax increases.

I think that you are wrong on both counts, but you certainly have the right to hold and express your opinions. You also have the right to believe, as you stated in your previous editorial, that same-sex marriage should be legalized and that our president is “demeaning” the Constitution by suggesting an amendment to the contrary.

However, I have subscribed to National Underwriter for many years because it has been an excellent source of news in the insurance-based financial services industry, not because I want to be subjected to the personal bias of the editor. Your opinions would be appropriate if written in “The Village Voice,” or even one of our several large, liberal daily newspapers but not in the trade paper many of us rely upon to stay current in our profession. I suggest you re-think the time and place you have chosen to promote your personal agendas.

Clark McCleary, CLU, ChFC

Houston, Texas

Reproduced from National Underwriter Edition, April 9, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.