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that are subject to the tax. It also assumes no cuts whatsoever in scheduled
benefits.
In this extreme case, the necessary tax increase, combining the
employer and employee side, is just 6 percent of projected wage growth
over this period. Yet Bowles and Simpson want to tell us that this tax
increase will have our children and grandchildren living in poverty.
The story changes little even if we add in the projected shortfall in
the Medicare program of 1.35 percent of payroll, half of which would be
applied to the employee and half to the employer. Again, assuming no
other changes and we make the program fully funded based exclusively on
payroll tax increases, the combined tax hit for Social Security and
Medicare is just 10 percent of projected wage growth over the next three
decades.
Of course people will object that they have not been seeing wage
increases because the rich have been getting all the gains from growth
over the last three decades. This is exactly right.
A Huge Distraction
The well-being of our children and grandchildren will be determined
by the extent to which people like Erskine Bowles, Alan Simpson and
their rich friends will be able to continue to extract all the gains from
growth. If they can make the next three decades like the last three decades
then our children and grandchildren will be screwed even if they stopped
paying Social Security and Medicare taxes altogether. (Of course then they
would be doubly screwed since they also wouldn't have Social Security
and Medicare benefits when they retire.)
In short, the whining about the deficit that Bowles and Simpson are
pedaling is a huge distraction from the factors that will actually determine
the well-being of the vast majority of our children and grandchildren. And
the truly wealthy are prepared to pay Bowles and Simpson lots of money
for this distraction.
Dean Baker is an economist and co-director of the Center for
Economic and Policy Research. He has written extensively on a wide
range of topics, including the housing bubble. His most recent book is The