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Friday, February 02, 2007

Did We Make FICA "Contributions" In 1933?

Here is how the latest "economic sky is falling" story began from the AP:

".....Savings Hit A Post-Depression Low By Martin Crutsinger Associated Press
WASHINGTON - Americans are saving at the lowest level since the Great Depression, and that could be a problem for the millions of baby boomers getting ready to retire. The Commerce Department reported yesterday that the nation's personal savings rate for all of 2006 was a negative 1 percent, the worst in 73 years. "..

Now open your mind, use your head and consider this. In 1933, there was no social security and so no one had FICA "contributions" deducted from their paycheck. Today, that tax is 6.2% of your paycheck PLUS your boss "contributes" another 6.2% of your paycheck to the guvmint.

Now, I don't know how you do arithmetic, but I figure this means we "contribute" 12.4% in "savings" or "FICA taxes" for every $100 we earn in a paycheck. I am self-employed so I pay the whole 12.4% myself.

It is fair to view this as a type of "enforced savings" except it goes into a big black hole. But if the AP and the Commerce Department had included these "savings or FICA contributions" in their calculation of national savings, there is no way today's savings rate is lower than it was in 1933! I suspect you would agree.

Lastly, for people who have been working for many years and making these contributuions, it is easy to feel like one of those shareholders who invested in Enron stock. I guess that makes the Congress a guvmint version of ENRON's crooked execs?

Here is the link to the story:

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