The Value of Bipartisan Reform, or, We’re In This Together

By James Schaefer.

It’s amazing what  can be found on government websites.  The Social Security Administration posts a chart of their annual FICA tax revenue, from 1937 to 2009, a full seventy-two years’ worth (link).  It shows the Trust Fund’s cumulative surplus, and is reproduced below.

From inception to 1987, the Trust Fund surplus never toped $100 billion, and the Fund was in deficit eleven times over the first five decades, with expenditures exceeding FICA receipts.

Then, starting in 1988, as a result of  bipartisan legislation in the early ’80s supported by both Republicans and Democrats that increased the payroll withholdings for both employees and the employer, the Trust Fund went into significant surplus, growing slowly at first, then gathering speed.

In 2000, the Trust Fund surplus topped $1 trillion for the first time.

That massive surplus has remained there for twenty years, taking the Trust Fund surplus from $109 billion in 1989 to $2.5 trillion in 2009.

That money, of course, was invested into special U.S. Treasuries, as required by law.

More significantly, it means that between $40 billion and $190 billion extra revenue went straight into the general fund each and every year.

That tidal wave of money, added to the budget-cutting that began in 1994 and that came jointly from a Republican congress and a Democratic president, saw federal budget surpluses in the years 1998 to 2001, during the administration of President Bill Clinton (Link).

It was paid as FICA taxes by the Baby Boomers and Gen X, at the height of their earning years, and it enabled the government to balance its books for the first time in decades.

The true credit for balancing the federal budget at the end of the ’90s does not go solely to President Clinton, as claimed by the Democrats, or solely to Speaker Newt Gingrich and the Republican Congress, as claimed by the Republicans; credit goes as well to the American public, who made sacrifices, cut their household spending, and paid the additional FICA taxes that enabled that Trust Fund surplus to grow so dramatically.

In the ’80s, under Republican President Ronald Reagan and a Democratic Congress led by Speaker Tip O’Neill, bipartisan legislation changed the withholding tax (FICA) from 5.65% (the rate in 1977) to 7.65% (the rate for 1990 and beyond).

It was bipartisanship again in the 1990s that gave us budget reform that ultimately led to four years of balanced budgets, and in both cases, households did their part to make it succeed.

Solutions will come about when both sides of the aisle work together – working with each other, and with the American public – to live within our means.

It is easy to make promises that we are unable to afford; it is harder to make the tough choices that will leave us solvent as a nation into the future, and, more importantly, will leave a better world for those who follow.

We are in this together.

 

 

 

 

 

 

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