Investment banker Jim Roumell has proposed a great idea over at the Washington Post. After 9/11, “strong” young men signed up with the military to defend America against… Well, I actually don’t know. At the time it seemed like an outburst of jingoism that had very little (if anything) to do with keeping America safe. But okay, let’s go along with Roumell’s analogy. Just like those courageous young patriots after 9/11, rich old patriots should sacrifice… Five years after the financial crisis.
But wait: it gets better! Roumell is saying that rich retirees should give up their Social Security. He suggests that those in the top 5% of the wealth distribution should do so. I don’t know Roumell’s net worth, but I’m pretty sure that he is a member of the 0.01%. So it would be pretty easy for him to give up his coming Social Security checks. But the people barely inside the top 5%? They would be earning about $80,000 per years in retirement, according to Dean Baker. Now, eighty grand in retirement is pretty good, but I’m not sure that I would call it rich. What is rich is obscenely wealthy people like Roumell calling this level of income “rich” when a few months ago they were screaming that $400,000 was “middle class.”
Most of Roumell’s OpEd just tries to show that his idea will bring in loads of money. In 2011, Dean Baker and Hye Jin Rho published a detailed study of this question, The Potential Savings to Social Security from Means Testing. They found that unless the government means tested down to the $40,000 per year range, there were very small savings to be had.
I think what is going on with Roumell is shown by what he didn’t mention in his OpEd: the payroll tax cap. Currently, there are no payroll taxes on incomes over $113,000 per year. Raising it even modestly to $200,000 per year would wipe out all of our Social Security funding problems. Forever. But Roumell doesn’t even want people to think about this obvious and just solution because it would cost him money. Let’s assume that the Roumell would normally have a working career (where he made more than $200,000 each year as is surely the case). He would probably have a 10 year retirement. With the higher payroll tax cap, he would lose about 50% more than he would by giving up his retirement benefits.
But who would really get screwed by Roumell’s plan are the people making right about the $100,000 per year mark. They would see no tax increase by raising the cap, but they would see a big hit from the loss of benefits. And that’s really typical of the super rich and their policy plans. They don’t generally recommend screwing the poor. First there is little money there. Second, it looks bad. But the people who have a fair amount of money but not a lot of political power? They’re a great target because the super rich can pretend that their plans will hurt the rich even while they help the super rich.
Regardless, I’m sure that Roumell’s plan is nothing more than an attempt to keep people from thinking about the real solution of raising the payroll tax cap. Because that is something that the rich would hate. If we could raise it to $200,000, what would stop us from raising it to a million? Or even eliminating it all together? And the truth is, other than the fact that we don’t live in a democracy and the rich control our politics, I see no reason not to do just that.
