Making Our Social Security System Sustainable

Our Social Security System is Unsustainable As It Is Now Structured

Our Social Security system is financially unsustainable because it is paying out more than it is taking in. Somewhere around 2033, beneficiaries will have their benefits cut unless we reform the system. Social Security is a PAYGO system in which the Social Security taxes paid by current workers fund the payments to current retirees. That works well as long as the number of workers is large compared to the number of retired people, but the number of retired people is growing much faster than the number of workers as our population ages, and that is why our system has become unsustainable.

When Social Security was founded in 1935, the number of workers was much larger than the number of retired people, and so, it made sense to base the system on the wages of current workers alone, but now the system is unsustainable. 

Why Do We Have a Social Security System?

To see how we ought to deal with this situation, we should go back to first principles and work from there. Why do we have a Social Security System? We have a Social Security System for the same reason that we engage in any economic activity. Why do we work to produce goods and services, and why does our government promote economic growth? We do these things to provide for our needs. We work to produce food so that we can eat; we work to build houses so that we can have places to live; we work to care for sick people so that they don’t die. We know that each of us will someday be too old to work, and so, we put aside a certain part of our income to provide for us when we reach that point. We do that as individuals and as a society.

How Can We Make Our Social Security System Sustainable?

Many Republicans want to tell us that we can no longer afford our Social Security System, mediocre as it is. They tell us that we must reduce the benefits provided to retirees because we cannot afford them. Their argument is that the Social Security Tax as it is now structured cannot provide the benefits that have been promised. They are right about that, but they ignore the fact that the Social Security tax that we pay does not define our commitment to provide for our old age. The tax is only the mechanism that we use to put aside money to meet that commitment. If the mechanism we are now using is inadequate, we should not go back on our commitment to provide a decent retirement for all. We should find a better mechanism for providing it. 

The system that we have now draws its income from taxes on wages and salaries but not on other forms of income. In the nineteen thirties it made sense to design the system that way, but it no longer makes sense today.  We can achieve a part of our goal of making the system solvent by taxing all wages and salaries instead of only those below a certain level, but that will not do the whole job. The number of workers needed to produce the goods and services that we buy is far smaller than it was in 1935. Moreover, We live in a time when a larger and larger share of our national income goes into returns on capital and a snaller share goes to wages. If our goal is to use a portion of our national income to provide for our retirement, we should ask ourselves whether income from capital should also pay Social Security tax.

We have determined that as a society, we wish to put aside a portion of our national income for supporting retired members of our society. If our mechanism for doing so is based on wages and salaries alone and the share of national income going to wages and salaries keeps declining while the number of retired people keeps growing, the result must be that the mechanism will fail eventually.

Investment Income Must Pay Social Security Tax

Fortunately, while the share of our income going to wages and salaries has declined, the total national income has not.  Our national income per capita is much bigger today than it was in 1935 , but the share of that income going to returns on capital has increased. We have plenty of income to support us in retirement, but we cannot do so by taxing wages and salaries alone. We must also tax the income from capital investment.

Our country today is much richer than it was in 1935 because the workers of today produce much more than the workers of the nineteen forties did, but the percentage of the national income that goes to workers has declined while the percentage going to capital has increased. That trend will continue as long as the return to capital investment is greater than the growth rate of the economy as a whole – a condition that has held consistently since the nineteen eighties. If we wish to have a sustainable retirement system, income from capital investment must pay Social Security Tax.

Emily Tseffos Understands the Need for Childcare

We Need Affordable Childcare

Emily Tseffos , who is running to become the state representative from Wisconsin District 56, understands that we desperately need affordable child care in Wisconsin, and that is why she supports Gov. Evers proposal to use state funds to extend Childcare Counts in 2024.  Unless the federal program is extended, it will disappear next year, and that would be a tragedy because, as a recent Post-Crescent article says,

Childcare is already unaffordable for most Wisconsin families. The U.S. Department of Health and Human Services considers child care affordable if it takes 7% or less of a household's income, all children included. Brooke Skidmore, owner and director of New Glarus' The Growing Tree Child Care Center and WECAN co-founder, said that many families devote 20% to 40% of their household income for one child alone.

Extending Childcare Counts a beginning, but by itself, it is not nearly enough to meet our state’s need for affordable childcare. If she is elected, Emily Tseffos will make expanding the availability of affordable childcare an important priority.

Why is it so important to invest our state’s money in affordable childcare?

Childcare is Infrastructure

Emily says that the easiest way to think about this issue is to think of child care as a kind of infrastructure.  We build roads and airports, and we support public schools and universities as infrastructure investments. We do that because we know that the free market would not provide these things even though our economy needs them.  Our economy also needs workers, and studies have shown that many women would take jobs if they could find affordable childcare.

Unfortunately, the market cannot provide childcare at a price that is affordable, that allows childcare workers to be paid a decent wage and that allows childcare companies to make a profit. So, we should think of childcare as a kind of infrastructure, and we should provide it just as we provide roads or public schools in order to help our economy to grow. Many of our businesses would like to expand, but they cannot do so because they cannot hire the workers they need. By expanding the pool of available workers, an investment in affordable childcare would help our economy to grow and thus would benefit our entire community.

Take Action Now

If you agree with Emily Tseffos that providing affordable childcare is important, there are two things that you should do:

• Right now, you should call your state legislators in Madison and tell them that you support the effort to extend Childcare Counts in 2024.
• Next year, if you live in District 56, you should vote for Emily Tseffos to represent District 56 in Madison.

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Socialism vs. Redistributive Policies

 One of my readers asked what the difference was between socialism and what I have called "redistributive policies," and perhaps others are not clear about the distinction. So, here goes.

What is Socialism?

"Socialism" has been given many meanings, but as I see it, the core idea is that economic production must be organized around the public welfare rather than around the profitability of companies. In its most extreme form, socialism involves the central planning of most production. In less extreme forms, it involves the public ownership of major parts of the economy that are deemed to be important to the public welfare. The problem with socialism is that it has never worked very well on a large scale, and in its extreme forms, it has been extremely oppressive. 

In a capitalist system, companies plan their work to maximize their profits, and, while that is not morally attractive, it actually promotes the public welfare pretty well most of the time. But not all the time and not in every way. The purpose of redistributive policies is to counteract the bad effects of capitalism while allowing it to continue to do what it does best, which is to promote economic efficiency. 

Redistributive Policies

There are two types of redistributive policies. One type is to subsidize needed services so that people can obtain them at an affordable cost. A subsidy for childcare would be an example. Everyone agrees that there is no way for the market to provide childcare at a price that is affordable, that allows childcare workers to be paid a reasonable wage and that allows childcare companies to make a profit. A redistributive policy might provide subsidies either to the childcare companies or to the consumers of childcare. Our government had such a policy for a while. It was intended to allow the childcare companies to avoid failing during the pandemic. 

Healthcare provides another example. Many people believe that no one ought to be denied adequate healthcare, but no country has ever found a way to provide healthcare to everyone without government support in some form. In healthcare as in childcare, the government uses part of its revenue to pay part of the cost of these services in order to make them affordable for everyone.

The other type of redistributive policy is more general. Its goal is to limit the increasing concentration of wealth that is inevitable when the rate of return on capital investment is greater than the growth rate of the economy. To limit the concentration of wealth, we need things like progressive income taxes, wealth taxes or inheritance taxes.  Again, the point of the tax would be to allow the economy to be run according to capitalist principles while avoiding the extreme concentration of wealth. The point of redistributive policies is to preserve capitalism while making it consistent with representative democracy. The point of socialism is to supersede capitalism.

Why We Cannot Ditch Capitalism

I have said that market capitalism and representative democracy have a fragile relationship. Without redistributive policies, forces within capitalism lead to ever increasing concentration of income and wealth in a small upper class and fail to produce an acceptable level of living for the bulk of the population. People lose faith in the political system and turn to demagogues like Donald Trump who put democracy in danger. 

If this is true, why shouldn't we get rid of market capitalism? If capitalism poses a danger to democracy, why not simply ditch the capitalism? Why go to a lot of trouble to make it less dangerous? The answer is that no one has really proposed an alternative to capitalism, although some people talk as if they had. 

"Socialist" Proposals are Really Proposals for Redistributive Policies Within Capitalism

Some politicians who call themselves “democratic socialists” have proposed that we create what they call a socialist society. However, when we examine their proposals, we find that they do not really propose eliminating capitalism at all. For example, Bernie Sanders ran for president on what he claimed was a democratic socialist platform, but his actual proposals were for things that I would call redistributive policies. He called for Medicare for All, free post-secondary education and the Green New Deal, but he left the fundamental capitalist structure of our economic system intact. There was nothing truly revolutionary in his proposals or in those of other democratic socialists like Alexandria Ocasio-Cortez. The Nordic countries of Europe have been touted as "socialist," but when we look closely at them, we see that they are really capitalist countries with high tax rates and strong, redistributive policies.

Most Communist Countries Have Become Capitalist

In the early twentieth century, communism seemed to be a serious alternative to capitalism. Communist revolutions occurred in several countries, but those revolutions did not lead to democratic societies and did not produce levels of living for their peoples that were better than the levels of living enjoyed by the people of capitalist countries. In addition, several countries gained their independence under the banner of communism, but almost all of them have turned to capitalism to provide better lives for their peoples. The only exceptions are countries like North Korea that are notoriously poor and repressive.

We Are Stuck with Capitalism

We are stuck with capitalism because there is no alternative to it. The problem for us is not to replace capitalism but to make our capitalist society more humane. I say "more humane" rather than simply "humane" deliberately. We should not aim for a perfect society. Instead, we should look for ways to make our society better than it is now. For example, we will probably never produce a perfect health care system, but it wouldn't be hard to find ways to improve the one we have. We will never find a perfect solution to our housing problem, but we can probably find ways to make housing more affordable than it is now. We should take small steps because we will undoubtedly make mistakes, and we will need to be able to correct them.

Let's get busy! We can make a better world.

Support Extending Childcare Counts in 2024 Because We Need Affordable Childcare

 We desperately need affordable child care in Wisconsin. During the pandemic federal and state funds made childcare a little more affordable, but the federal program will disappear next year if Gov. Evers’s initiative to extend Childcare Counts is not passed. According to a recent Post-Crescent article, “

Child care is already unaffordable for most Wisconsin families. The U.S. Department of Health and Human Services considers child care affordable if it takes 7% or less of a household's income, all children included. Brooke Skidmore, owner and director of New Glarus' The Growing Tree Child Care Center and WECAN co-founder, said that many families devote 20% to 40% of their household income for one child alone.

Childcare Counts has allowed many centers to remain open and even to pay their workers a little more. The program began as a program to help childcare centers to remain open during the pandemic. The program was extended in Wisconsin during 2023, and it is scheduled to end at the end of this year unless its funding is extended. Gov. Evers has called a special session of the legislature to consider extending the funding. He has proposed $340 million as a step toward making Childcare Counts permanent in Wisconsin. Democratic legislators in Madison are doing their best to make sure that Gov. Evers's proposal is passed, but they need your help. So, call your legislators in Madison and tell them that you support the effort to extend Childcare Counts in 2024.

In a previous post, I said that we Democrats needed to recover our focus on redistributive policies, and childcare is a good place to start.  Childcare is unaffordable everywhere in the United States including in Wisconsin. Moreover, licensed childcare centers are closing because they cannot charge enough to make a profit on their business, and childcare workers are underpaid because the centers cannot afford to pay them more. Our employers need workers, but people cannot afford to take jobs if they cannot provide for the care of their children. Moreover, good childcare programs can provide the early childhood education that is crucial to a child’s educational development. If we want to make our system work for all of our people, we have to provide subsidized childcare.

• The cost of childcare keeps many of Wisconsin's women in poverty. If you are a feminist, you must support the extension of Childcare Counts.

• The cost of childcare keeps many non-white families in poverty. If you are against racism, you must support the extension of Childcare Counts.

• If you want to see many of Wisconsin's families of all races pull themselves up from poverty, you must support the extension of Childcare Counts.

Now is the time to call your state legislators in Madison and tell them that you support the effort to extend Childcare Counts in 2024.