To me the solution to the coming Social Security shortfall is obvious. Just eliminate the income cap that exempts the rich from paying Social Security on their entire salaries. Problem solved. However raising the retirement age appears the solution most likely to be adopted. My principal objection to raising the retirement age is it shifts benefits to the rich because life expectancy varies directly with wealth. However, I ran across a proposal that, while not the best, is a compromise that could warrant consideration.
IF nothing is done about entitlement spending, and if our current tax breaks continue, then by 2025, tax revenue will be able to pay for Medicare, Medicaid, Social Security, interest on the debt and nothing else. The rest — defense, medical research, highways, education, energy — will have to be financed by deficits. Social Security’s funding is predicted to run short in 2033, Medicare’s trust fund in 2024.
Like much else in Washington, there is little bipartisan agreement on what to do about it. When it comes to Social Security and Medicare, Republicans emphasize cuts and privatization, while Democrats strongly oppose both approaches. Neither side was able to embrace the 2010 bipartisan Simpson-Bowles plan, which proposed lowering Social Security’s cost-of-living adjustments, increasing the taxable maximum income and raising the eligibility age to 69 by 2075.
But here is a better bipartisan reform: Graduated eligibility. Instead of having a fixed age at which people can get Social Security and Medicare, we should link the age of eligibility to lifetime wealth. The richer you are, the older you would have to be to be eligible for Social Security and Medicare.
Here’s how it would work. People in the bottom half of the lifetime earnings distribution would become eligible for normal retirement benefits at age 65 for Medicare and 66 for Social Security, just as they are today. But people in the next quarter of the lifetime earnings distribution would become eligible for the respective programs at 67 and 68, and those in the top quarter would become eligible at 70 and 71. All eligibility ages would increase over time, as they are scheduled to now.
In all income brackets, those choosing to retire later than the standard age would still receive higher Social Security benefits, called delayed-retirement credits. For those choosing to retire earlier and accept reduced benefits, on the other hand, nothing would change in the lower bracket, while the minimum age would increase in the two higher income brackets. And wealthier older people would have the choice of buying into Medicare at age 65, though they would have to pay for it before the age of 70… [emphasis added]
Inserted from <NY Times>
The reason this might work for me is that it does not address the problem on the backs of the poor and middle classes and shift wealth to the rich the way both the Republican plans and the Simpson Bowles Plan do. However, anything that does not shift wealth from the poor and middle classes to millionaires and billionaires will not be acceptable to the Republican Party.
12 Responses to “An Interesting Proposal”
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Definitely go with your first suggestion, and lift the cap on income. Hell, I’d even add in the income made from capital gains – either that or revise the way billionaire hedge fund managers now get to disguise their true income by calling it capital gains, and so get to have it taxed at the much reduced rate (a benefit they so desperately need … because, after all, who can squeak by on an income of only a few million dollars a year?)
I have real concerns with tying Social Security and Medicare together in addressing funding concerns – it will only muddy the waters and create more opportunities for Repubican shenanigans.
Nameless, I agree. As I said, lifting the cap is my preferred solution.
Good point.
They won’t do a bill that does favor the rich. They are such lying, greedy MFs – I wouldn’t trust them as far as I could throw them!
You mean ‘doesn’t favor the rich’, right? If do I fully agree.
“Just eliminate the income cap that exempts the rich from paying Social Security on their entire salaries. Problem solved. ”
It seems the wealthy will do anything to avoid support of the very system that makes them wealthy…
Ironic, isn’t it?
Good sense is not part of their program-
Right. It begins and ends with nonsense.
I am just tired of hearing them called entitlements since we have all paid into them our entire working lives. If they would pay back the money they have “borrowed” from Social Security, we wouldn’t have a problem.
Edie, they really are entitlements. We are entitled, because we paid for it. Good and necessary programs like Medicaid and Food Stamps are what should not be called entitlements.
Graduated eligibility makes sense to me, but it MUST be accompanied by removal of the income cap on contributions, or at least significantly increase the income cap so that the wealthy pay more. The wealthy should live on their investment income until 71. Does this have a chance of happening? Not with the current Congressional make-up!
Vote Democrat 2012!!! Vote Obama/Biden 2012!!!!!
Lynn, I agree, but if we eliminate the income cap, graduated eligibility is no longer needed.,