Magazine article The National Public Accountant

Social Security: The National Dilemma

Magazine article The National Public Accountant

Social Security: The National Dilemma

Article excerpt

Social Security: The National Dilemma

By now you are all well aware of the significant political and programmatic conflicts confronting the Social Security system, specifically the Social Security Trust Fund. Although individuals may have often thought that the trust fund reserves were actually utilized to mask the looming budget deficit, federal executives and legislators have avoided any public affirmation. Society members should carefully watch this issue, particularly as many self-employed Americans and practitioners are just beginning to enjoy an era of greater Social Security tax equity.

The big questions now facing the Administration and congressional leaders alike are: Should the trust fund be removed from budget deficit reduction considerations? How can this be accomplished? How will America realistically encumber the necessary reduction of the "actual" budget liability? Is the current Social Security system really designed to handle the strain of an aging society? What can be done?

This widely disputed and controversial issue was single-handedly introduced by Senator Daniel P. Moynihan (D-NY) with the introduction of S. 2016. In a stunning display of classic and effective political maneuvering, Senator Moynihan's well-planned introduction of S. 2016 has now forced National leaders to run for cover.

Cleverly introduced during an election year, the S. 2016 was originally designed to inform American taxpayers of the covert misapplication of the Social Security funds to reduce the federal budget deficit. At first, the proposal was seen as politically amusing yet unrealistic. However, upon receiving unexpectedly widespread comment, Washington's politicians are now seriously reviewing all aspects of the proposal. Predominately viewed as unworkable, the proposal has forced political positions on all sides. The Bush Administration has acknowledged that the Social Security Trust Fund is actually utilized in budget considerations. Republican leaders are now reviewing the entire Social Security program and its ability to handle the projected financial drain of the retiring baby boomers in an effort to impede S. 2016's chances for passage. And the Democratic leadership is interested in capitalizing on the proposal during an election year as well as confronting America's "No New Taxes" President with an unavoidable tax hike.

Simply put, S. 2016, would repeal the payroll tax increase of January 1, 1990, and return the Social Security financing method to pay-as-you-go system, thus ultimately removing the Social Security Trust Fund reserves from future deficit reduction considerations. This approach, however, also imposes stringent tax burdens upon future generations.

The unforseen introduction of S. 2016 has ultimately opened Pandora's box to applicable solutions - most notably the payroll tax rate cut. Partisan lines have been drawn. House Majority leader Richard Gephardt (D-MO) is heading a Democratic Social Security Task Force to review several viable options for formal recommendation. Prevailing task force options include an income tax credit for lower and middle-income taxpayers, a one-year rollback in the Social Security payroll tax, and elimination of the tax rate bubble, raising the top marginal rate for the highest income tax bracket to 33%. Alternately, Republican leaders have formed a GOP "Task Force to Save Social Security" and several supplementary review committees.

During this election year all legislators seem to be in agreement that the Social Security reserves should be removed from further deficit reduction considerations. …

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