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Reply #11: FICA Taxes Were Increased During Reagan's Terms to Prepay Boomer's Social Security [View All]

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Elmore Furth Donating Member (1000+ posts) Send PM | Profile | Ignore Tue Jan-18-11 11:51 PM
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11. FICA Taxes Were Increased During Reagan's Terms to Prepay Boomer's Social Security
Edited on Tue Jan-18-11 11:58 PM by Elmore Furth
Reagan raised taxes in 7 of his 8 years in the White House The social security trust fund has 2.5 trillion in t-bills that are accumulating interest . The money was spent but by law and under the constitution the money cannot be defaulted on . The FICA taxes were raised in the Reagan administration so that the Baby Boomers would prepay their Social Security.

The outsize Federal budget deficits under Reagan necessitated hiking the FICA tax substantially in order to fund Social Security. Most of you see that deduction on your paychecks. The idea was to provide for the baby boomer generation when its massive ranks began to retire.

As result of these taxes, Social Security accumulated a vast, 2.5 trillion dollar surplus. Good news for a generation of retirees, right? Well, sorta. That money has been spent. When you hear someone talking about "Social Security in Crisis," that's what they're talking about. That's the "crisis." They're talking about the fact that Uncle Sam owes back that vast amount of money it has already spent.

Cheney's "deficits don't matter" is only true if the US government is going to default on the US Treasury Bonds held by the Social Security Trust Fund.

Then, they Trust Fund was squandered on tax cuts for the wealthy and foreign adventures so that rich Republicans wouldn't have to pay their own way.

We keep hearing that Social Security is "broke," thanks to the well-funded efforts of folks like these. But the Trust Fund currently holds a $2.6 trillion surplus, and it's expected to rise to $4.2 trillion by 2025. That's a lot of money set aside for people's retirement -- money some people would rather see used for other purposes, like paying for the spending spree of the last ten years or underwriting tax breaks for the well-to-do.

The Social Security Law said that the Trust Fund could only be used for Social Security benefits. Now the wealthy want to default on these LEGALLY MANDATED DEBTS so they don't have to compensate for their tax cuts that caused the federal deficit.

So are we going to default on the Treasury Notes sold to the Chinese? Why not? They are just a binding as the Social Security Trust Fund?

In the end this was never about anyone's grandchildren paying off the national debt. It was about the wealthy paying for their fair share of the government budget. AND THEY DON'T WANT TO PAY. Sounds like low lifes trying to welsh on their debts, doesn't it?

"When Ronald Reagan was elected, the supply-siders got a chance to try out their ideas. Unfortunately, they failed." Although he credited supply-side economics for being more successful than monetarism which he claimed "left the economy in ruins", he stated that supply-side economics produced results which fell "so far short of what it promised," describing the supply-side theory as "free lunches".<29> Krugman and other critics point to increased budget deficits during the Reagan administration as proof that the Laffer Curve is wrong. Supply-side advocates claim that revenues increased, but that spending increased faster. However, they typically point to total revenues<30> even though it was only income taxes rates that were cut while other taxes, notably payroll taxes were raised.<31> That table also does not account for inflation. For example, of the increase from $600.6 billion in 1983 to $666.5 billion in 1984, $26 billion is due to inflation, $18.3 billion to corporate taxes and $21.4 billion to social insurance revenues (mostly FICA taxes).<32> Income tax revenues in constant dollars decreased by $2.77 billion in that year. Supply-siders cannot legitimately take credit for increased FICA tax revenue, because in 1983 FICA tax rates were increased from 6.7% to 7% and the ceiling was raised by $2,100. For the self employed, the FICA tax rate went from 9.35% to 14%.<33> The FICA tax rate increased throughout Reagan's term, jumping to 7.51% in 1988 and the ceiling was raised by 61% through Reagan's two terms. Those tax hikes on wage earners, along with inflation, are the source of the revenue gains of the early 1980s.<34>

Supply-side economics
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