n a recent article, “Social Security: Why bigger isn’t better,” the authors make the argument that in lieu of gradually increasing the payroll tax over the next 24 years, from the current 12.4 percent to 14.8 percent of payroll to shore up Social Security as proposed in HR 2100, Americans would be better off if that increase — amounting to about $1,200 a year — was instead kept in the pocket of the average American so they could invest it. They conclude that not only should the payroll tax not be increased, but that it should be cut to 10 percent so that the American worker can use that extra income “however they want, based on what they know is best for their families.”
Sorry, I’m not buying it. If this were true — that Americans know what’s best — we should see a savings rate in this country higher than the current 6 percent, comparatively much worse than China (37 percent), Mexico (21 percent), France (15 percent) and Germany (10 percent). A Federal Reserve report noted that one-third of middle-class adults don’t have funds to cover a $400 emergency, and nearly 40 percent of all U.S. households do not have a retirement account.
Social Security was not meant to cover one’s retirement, but to suggest that cutting the payroll tax will fix Social Security by magically incentivizing Americans to invest in a savings or retirement account is wishful thinking. HR 2100 is not a perfect bill, but let’s shore up Social Security (as Ronald Reagan did) and get on with it.