Windfall

One thing I feel is important in personal political media consumption is to read things outside of your echo chamber.  We all have one, no matter how independent we think we are.  On Facebook or Twitter, we tend to be friends with those who share our beliefs, both figuratively and literally.  Republicans are likely to tune into Fox for their television, and Democrats are likely to tune into MSNBC or to get their news from Comedy Central.  To those who are interested enough in politics to read blogs like this one, well… the progressives have HuffPo, Slate, Vox, and the like.  Conservatives have National Review.  The Trump crowd obviously has Breitbart.  People like me have Reason and TheBlaze… or the Ron Paul Report, Free Talk Live, etc.  But if those who share your beliefs have a monopoly on providing you with yours, well… where’s the challenge in that?

There’s a story about a bill crafted by Sam Johnson in the House that’s getting a lot of airtime in the leftist media outlets.  Perhaps the right isn’t covering it as much because it hasn’t even made it to committee, perhaps it’s not sensational enough to those unlikely to be opposed, or maybe the right just doesn’t want to get their hopes up.  The left is billing it as “cutting”, “gutting”, or eviscerating social security, but that’s nothing new.  The times when Republicans propose a small cut in the rate of growth while letting the program grow past it’s budget all the same, we’re still told it’s extremist austerity that will kill poor ol’ grandma by choking her to death while wearing a monocle and a top hat.  To those who don’t subscribe to Occupy Democrats, well… we’ve heard them cry wolf so many times that if Republicans ever did grow enough balls to try and address social security reform adequately before 2034 (when it’s set to automatically cut benefits by 21 percent if nothing is done), we wouldn’t even know about it until after it was done.

So I’ve begun looking at the bill.  It proposes too many changes for me to hope or you to fear that it’d have any chance at passing in it’s current form, and it’s both complicated and vague enough that I can’t dismiss how much it may or may not actually cut the program until me or an economist I trust actually crunches the numbers.  Among other things, it would change the way benefits are calculated, raise the retirement age, change how cost-of-living is determined, cap certain portions of benefits related to spouses and children, require certain child beneficiaries to attend school, change things like the windfall elimination provision and retirement earnings trust, change the tax structure on benefits, change payout structures, add in a mixture of progressive and regressive reforms, viewing divorce and disablement differently…

In other words, this isn’t something that can be easily summed up enough to do it justice with commentary the length of a blog post.

I’ll look at just one provision for now, and plan to return to other provisions on a slow news day when I’ve got time.  After closing my eyes, riffling through papers and pointing at random, the winner is… The Windfall Elimination Provision Repeal?  Well, that’s some bullshit.  It’s not just difficult to make that one interesting, but it even takes time to explain what it even is, given how policy wonkish the subject is.  Alright… bear with me if you want to.

The first obvious question is “what is the Windfall Elimination Provision”?  In broad strokes, it is a policy meant to address an imbalance in payment for those who are employed in a job not required to make social security trust fund payments.  There’s exceptions to the requirement that employers and workers contribute to the fund, primarily in local government positions like police, firemen, and teachers that have pensions instead and qualify for the exemption.  Given that social security old age payments are based on the amount of money contributed to the program, and that it’s often the case that those with these kinds of jobs worked other jobs as well, it doesn’t paint an accurate picture in the benefit formula of what the government believes they should receive.  Essentially, the idea was that workers were getting a “windfall” by collecting a pension and receiving a disproportionately large chunk of social security as well.  This was further complicated by the fact that these benefits were calculated without considering the majority of years of employment, meaning that these workers were considered more poor than they actually are.  Social security’s payout system is meant to be a progressive one.  Yes, if you pay more into the system, in general you get more out of it.  But payouts are larger as a percentage of contributions on the lower end, rather than a dollar amount, and that’s the metric that makes more sense given how the program is sold to the public.  The windfall elimination provision was meant to address that, but in the opinion of many has gone too far in the other direction, making payouts more regressive.

Alright… assuming I didn’t bore you away with that last paragraph, there are two obvious questions that should come to mind about this, and which one is first asked probably says something about whether you place a higher value on equality and fairness, whether you support the program itself in it’s current incarnation, or concrete change or whether you approach issues from an immediate or long-term kind of way.  The first obvious question, to me, is… “why are local governments exempt from having to participate in FICA in the first place, when other employers (including those who also offer generous pension benefits) aren’t?”  The second is “if these local governments and workers can be exempt and essentially opt out of social security participation, why can’t I?”

When it comes to funding a program running a deficit, that relies on mandated contributions from every worker and every employer, and is funded as pay-go… well, carving out such a large exception harms the system itself from a contribution vantage point, especially given the growth in the percentage of the workforce employed by the government rather than in productive industries mitigating any money saved on the payout end.  I guess that depending on how one views social security or long-term change, that could be a positive or a negative, but it’s true.  As with nearly any exemption in any kind of legislation, this kind of carve-out has winners and losers, unintended consequences, and adds a layer of complication to the code that governs the program which intentionally makes it harder to understand.  Government relies on complexity to avoid transparency as a general rule.

–Gary Doan