and this has screw all to do with raising the payroll dedcution limits does it?


sooo you are in favor or removing the cap?

If wealth is only created and not distributed, it does not exist. Someone must receive and use the wealth or it remains wealth only in potential. Nobody owns wealth the instant it is created; society must divide it up according to the rules society has created for that purpose, and apply title deeds, before anyone owns it, and so before it can truly be wealth, properly so called. If the economy fails to distribute the wealth it produces, it breaks down in phenomena such as the Great Depression, wherein wealth piles up in warehouses and cannot be owned or used by anyone, and as a result of that failure in distribution production also slows or ceases.

Distribution of wealth is every bit as important as creation of wealth. In fact, one might argue that it is more important, because creation of wealth is easy, whereas because of the rules that we have applied to distribution of wealth in service to private greed, that distribution is often difficult and subject to failure in many ways.

The way our economy works gives rise to several logical fallacies. One is that a person "rightly" owns what the rules of our society say he owns. Nature does not come with title deeds. Who owns what is society's decision, not so much directly and in person as indirectly by setting the rules that govern acquisition, and there is no objective "right" way to make that division. Another is that wages paid for work represent the contribution of the worker towards the production of wealth. They represent nothing of the sort; rather, they serve two functions in the economy, and those two functions often conflict. One function tends to keep wages low, but the other depends on keeping them high.

One function is to motivate the worker to work. Because capital property -- meaning the property necessary to produce wealth, originally land but now expanded to include other things as well, including machines, organizations, and even ideas -- is privately owned in our society, and because that ownership is very poorly distributed and (by design) falls into a very few hands, most people are denied the opportunity to produce wealth on their own initiative. Instead, they must serve someone else, some untitled baron or duke, some owner of capital property, providing the labor necessary to produce wealth from that property in exchange for a share of the wealth -- but as small a share as the property's owner can pay and still acquire the labor. The worker would not do the work literally for nothing, although if kept desperate enough he will do it for something approaching nothing, and so the pay (against that background of personal impotence) serves to motivate him. This is the way our economy achieves the first half of its function, to create wealth.

The other function is to distribute the wealth produced. Wages allow workers to consume a (small) share of the wealth collectively produced by themselves and other workers from the capital property that society assigns to the ownership of individuals and corporations. This distributes the wealth produced among the people, and is the way our economy achieves the second half of its function, to distribute wealth. As long as we have full employment at high wages, it sort of works, not ideally but acceptably. When wages fall, or fall behind inflation, or even fall behind increases in productivity, it fails, and we have a credit-driven economy which eventually collapses into recession.

When wealth is concentrated into too few hands, the economy as a whole suffers, and so of course do the individuals who are consigned to poverty. (And there will always be such individuals given a set of rules that require it; it is meaningless to point out that any given individual can better his lot by educating himself and being industrious and self-disciplined. Given sufficient native ability this is true, but it only means that someone else, rather than him, will occupy the mandated poverty slot, which is always occupied by the least gifted, least industrious, least ruthless, and least lucky X percent of society -- the value of X being set by the rules of wealth distribution. If everyone in society has a college education and nobody suffers from mental illness or drug dependency, but nothing changes about the rules of wealth distribution, the only result will be that all poor people will have college degrees and be mentally healthy and drug-free.)

I am pointing out all this to say that to call even the most ham-fisted and heavy-handed scheme of wealth distribution a violation of people's rights is preposterous. However, when we get down to how wealth should be distributed, or redistributed, the method does make a difference. My opinion is that it is much better to redistribute wealth before the fact, by changing the rules according to which wealth is distributed, than to redistribute it after the fact by taxing one group of people and directly giving that wealth to another group. Not that I think there is anything morally wrong with the latter approach, it's just that the former way works better. So -- actions by the state that serve to drive wages up, and keep them high relative to productivity, are the best method of redistribution. Other ways can perhaps be used to catch those that slip through the cracks, but the less we have to turn to them, the better.

All of this is fairly moderate and can be achieved through reasonable business regulation and labor-friendly trade and immigration policy, leaving the core system of private capital property ownership intact. This does not mean, however, that we should not consider (carefully and cautiously) the possibility of some more radical change. There is nothing sacred about private capital property ownership; human beings did without it for roughly ten times as long as we have lived under it. In precivilized societies, capital property (all of it land in those days) was owned collectively by the band or tribe, not privately. We cannot return to that system today, but it illustrates that something radically different from today's system might work. For example, suppose the rules of ownership stated that land could not be owned, only leased from the state; suppose, further, that it could be leased corporately, and that by law all employees of a corporation were members of it entitled to a share of the wealth it produced in addition to their wages? (There could be other terms of lease for such things as private dwellings, but that would cover business ventures.)

I'm not suggesting this as a full-blown alternative, merely painting a broad-brush picture to help people think outside the box. So far, we have tried only three ways to run a modern economy: laissez-faire capitalism, centrally-planned socialism, and a managed-market economy that is a mix of the two. Of those three, the third by far worked best. But it seems to me that the biggest problem with socialist economies was the central planning and control, that did not allow enough in the way of decentralized decision-making. Could an (essentially) socialist system that avoided that flaw be designed? Worth thinking about, I suggest.

Another interesting article using info. provided buy a non partisan grp. ala social security and how change proposed to it by Obama would just equal another tax and push up marginal rates back to 30 year highs.

It is interesting certain sects of our gov. and "citizen" grps. will not allow or even discuss any changes to SS, except when it comes to another infusion of tax payer funds directly from the populace, and they know, their adherents in D.C. spend it almost as fast as it comes in.

Even suggest any change that would remove the money from any gov.’s ability to screw with it, is of course used to scare the shit out of seniors and the usual class warfare results....hummm cui bono?

For those having a hard time getting their heads around this issue, lets see, a nurse and a cop are married and living in the bay area. If you think that a household income of 250.000 in this area or say nyc, Chicago, hell any large, heavily taxed urban center in states with marginal rates at the top of the scale, is rich, you’re crazier than a bed bug.

Whats more, combine this with the total rearrangement of the tax brackets when the bush cuts expire, you are talking some serious coin, rich my ass.



Obama's Social Security Fine Print
By DONALD L. LUSKIN
June 25, 2008; Page A15

Last week, Barack Obama revealed his plan to shore up Social Security's shaky finances by raising the income level on which the payroll tax is applied. Currently, incomes above $102,000 are exempt, with that threshold rising every year indexed to wage inflation. Mr. Obama would keep that limit in place, but then assess payroll taxes on incomes above $250,000, which his campaign claims would apply to only the richest 3% of Americans.

Mr. Obama angered liberals last year when he admitted that there was a "Social Security crisis." But at least Mr. Obama's base should be appeased now that his solution to the "crisis" is to soak the rich. One liberal columnist actually noted with glee the fact that this would take us back to top tax rates not seen since the 1970s.

According to the nonpartisan Tax Policy Center, Mr. Obama's new tax would siphon off 0.4% of gross domestic product annually. Combined with Mr. Obama's other tax-hike initiatives, "the total tax on labor would be close to 60 percent. In high-tax states like California and New York, the top rate would be even higher."

Would it help Social Security's financing problems? Mr. Obama has no idea. One of his senior economic advisers admitted to me that no one on the campaign has run any detailed models or performed any rigorous analysis. When one proposes an enormous tax increase, shouldn't there at least be a spreadsheet somewhere?

But the most alarming thing about Mr. Obama's proposal is that the $250,000 threshold, above which the payroll tax would be applied, refers to household income, not individual income. So it's quite deceptive when he claims that the $250,000 threshold will "ensure that lifting the payroll tax cap does not ensnare any middle class Americans."

Suppose your household consists of you and your spouse, each earning wages of $150,000 per year. Currently, you are each subject to the payroll tax up to $102,000 of wages, so together you are taxed on $204,000. Under the Obama plan, you'd be taxed again on another $50,000 of wages.

At the current payroll tax rate of 12.4% – 6.2% from wage-earners and 6.2% from their employers – your household would be looking at a tax hike of $6,200 per year. You probably didn't consider yourself rich before, and you certainly won't after paying that tax bill.

But that tax bill could be higher still. While the payroll tax has always been calculated just on wages from labor, Mr. Obama hasn't decided yet what forms of income will be included in the $250,000 threshold. It's an open question whether it might include interest on savings and capital gains income.

And neither has Mr. Obama said whether the rich – and, truth be told, the middle class – paying his new higher taxes will get correspondingly higher Social Security benefits when they retire. Throughout the history of the Social Security program, there has always been a connection between what you contribute in taxes and what you get back in benefits. If Mr. Obama uncaps the wages subject to tax, but doesn't uncap benefits, then he has severed the link between them. Social Security would stand revealed not as a work-related contributory retirement system, but simply as a tax-funded welfare and income-redistribution program.

And for all that, Mr. Obama's proposal won't help Social Security's long-run solvency problems.

According to the Social Security Administration actuaries, uncapping all wages subject to the payroll tax (not just those above $250,000) doesn't make much difference to the system's long-run solvency. If the increased payroll tax payments earn increased benefits, then only about one third of the system's 75-year shortfall is addressed. Even if there is no corresponding benefit increase, only about half the shortfall is addressed.

Remember, that inadequate result is what you get when all wages are subject to payroll taxes. Mr. Obama's plan – even with his household definition of $250,000 income – would collect far less than that. No wonder Mr. Obama's economic advisers aren't interested in doing any detailed analysis.

Worst of all, even the small contribution to Social Security solvency that Mr. Obama's plan might make is entirely illusory. In fact, the more taxes his plan collects, the worse Social Security's long-term situation gets. That's because all plans based on collecting taxes and saving them in the Social Security Trust Fund for future benefit payments rely on the U.S. government being able to redeem the Treasury bonds that trust fund holds.

There's only one place that the money to redeem those bonds can come from: taxes. So ironically, any tax dollars collected today will have to be collected all over again – plus interest. You like the idea of paying more taxes today for Mr. Obama's Social Security plan? Then just wait 20 years or so, because you'll get to pay more taxes all over again.

Obama's Social Security Fine Print - WSJ.com

hey, let them head down to place like oh, Venezuela, wherein the great socialist beast of wealth distribution as opposed to creation lives and breaths......
got milk? maybe on Monday senor ...

It wasn't a stupid economic move in the short-run. It moved money those more likely to spend it. The "recession-within-the-Depression" was caused by increasing other taxes and cutting spending in an attempt to balance the budget.

But since the economy grows every year under normal conditions, every year should be an "all-time high" for revenue.

Yes I agree, but as averages go its still higher with weighted averages for pop. growth etc.

No, it's really not. In fact, the "highest revenue ever" back in 2005 was the longest time between revenue peaks since the Second World War.