Thursday, July 14, 2011

Finding money: Social Security and the Economic Crisis

When people require extra money, both the reasons for the need and the method used to fill the coffers depends on the economic status of the individual.

Many in the middle classes live paycheck-to-paycheck. A missed payday, medical emergency, or car repair triggers a scramble for cash. People at this level might look for extra work, either overtime at their regular job or part-time at a second job. Many use credit cards, accumulating debt they might not be able to pay later.

In the depths of poverty, life is hand-to-mouth. People barely survive the negative gap between income and outgo and often lack money for food or rent. A few might find extra work, but many seek help from government agencies or charities.

In the rarefied air of the upper classes, need disappears and greed is the norm. Unusual expenses arise when Buffy demands a soiree to outshine the party hosted by her private-school rival, Missy, or Dexter IV expects a luxury vehicle when he attends Dexter III’s alma mater instead of the sports car he used during his prep-school years.

A few hundred thousands to cover these expenses is no problem. Dexter III just convinces his board of directors to boost his annual bonus. Then he gifts his trophy wife with a private Caribbean retreat for those long winter vacations.

When government finds itself short of ready cash for such essentials as military pay and seniors’ retirement, where does Congress look? To the Dexters who can spare a luxury or two and help the rest of us? Or to people at the middle and lower levels, where any unexpected expense could push them onto the road to ruin?

Most conservatives propose the latter. They make frequent reference to the sacrifices people must make, but they balk at any suggestion that the super-blessed be affected by any imagined “hardship.” Instead of raising taxes on the super-rich, they propose raising Social Security taxes and cutting retirement and medical benefits to the lower classes.

Social Security is a tax on the poor and middle class. The wealthy pay nothing more into that fund on earnings above $106,800.00, a pittance for people in the highest brackets. Social Security is a lifeline for the poor, but since benefits are based on previous earnings, the lifelong poor rarely enjoy a decent existence in retirement.

Since Social Security is paid by and most useful to people in the lower classes, the only people who should decide how to design and administer the service should be people who make less than $110,00.00 per year. The same goes for Medicare and Medicaid, which are vital to poor people and irrelevant to the wealthy.

Conservatives argue that concentrating wealth with the few ensures a strong economy, but this philosophy is upside-down. History shows that every era in which hard-working lower classes generate great wealth for the privileged leads to a period in which members of the poor and middle classes lose the benefits and capital they struggled to amass during boom times.

When wealth flows upward, people below suffer, and squeezing the common people eventually destroys the economy. That’s because companies depend less on investment than on income from the goods and services they produce. Without customers, a company will eventually fail and be forced to close its doors. Those customers are the millions of lower-class members who spend most of the money they earn or receive in various benefits to purchase products and services from the companies many of them also work for.

And that labor is another vital piece of the economic puzzle. Nobody generates a million dollars or more through their efforts alone. It takes the hard work of dozens of people just to provide the labor required to support the payment of a million dollars to anyone. If one million goes out to one person, then all the others in the equation must also receive a few thousand for their efforts. The highest earner directs the operation of lower-paid team members, many of whom could likely do their jobs without much direction in the first place.

The conclusion must be that we should worry less about the rich and begin to bolster the status of people in the lower and middle classes. Only then will we start to solve the serious economic problems now threatening the world economy.

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