I'm getting pretty tired of this. For starters, I didn't exactly ask to be born in the late 50s. But I was. Given a choice, I'd just as soon not be one of the biggest generations born in the US. I'd rather stay in my corner and be creative. Like it or not, though, I am a Baby Boomer. And lately, that means I'm viewed as a piggy citizen who wants more than my fair share at the expense of...gasp! My children. And my future grandchildren, of course.
This is the Village Wisdom, of course. Instead of dealing with reality, it's far easier to set up a generational battle between us and our children over who might be more entitled to a future without a ballooning deficit by suggesting Boomers take the hit now in order to make it nicer for everyone else.
There has been much brave talk recently, from Republicans and Democrats alike, about reducing budget deficits and controlling government spending. The trouble is that hardly anyone admits that accomplishing these goals must include making significant cuts in Social Security and Medicare benefits for baby boomers.
Bullsh*t. Love the "hardly anyone admits" sentence there, stated as if it were fact that no one in their right mind disputes. This is how they do things. They state things as fact which are not fact, in order to make us think it's fact.
There is no need to make significant cuts in Social Security or Medicare. The trouble is that hardly anyone admits that accomplishing these goals must include reasonable tax increases to retire the deficit in a reasonable amount of time. Because, and listen closely...
Social Security isn't ballooning the deficit. Medicare doesn't have to balloon the deficit.
Repeat that. Over and over.
The tax cut deal just made cut employees' Social Security contributions by 2% and those contributions will be made up via the general fund. This is why there's such an outcry on the right about the deficit (even though they also argue that tax cuts don't have to be paid for...) and on the left about the danger this poses to Social Security. On this one, the left is correct, but it's a problem which could be remedied with one small change to existing law.
Equalize the taxable wage base. It hasn't been done for 20 years. The cap is too low. Leave employees' contributions at 4% and raise the limit to cover the difference. That's all. In 2010 and 2011, the taxable wage base was $106,800. Any earnings over that level do not count for purposes of Social Security contributions (though they do count toward Medicare contributions).
This 2009 report (PDF) tells the tale quite simply.
CRS estimated the potential impact of eliminating the taxable wage base on future benefits and taxes. If the base were removed in 2013, CRS estimates that by 2035, 21% of beneficiaries would have paid some additional payroll taxes over the course of their lifetimes. However, the average change in taxes and benefits would be small. Looking only at individuals who would pay any additional taxes over the course of their lifetimes, at the median, total lifetime tax payments would rise by 3% and benefits would increase by 2% relative to current law. In general, those in the highest income groups would have the largest changes in both tax payments and in benefits relative to current law.
Raising or eliminating the cap on wages that are subject to taxes could reduce the long-range deficit in the Social Security Trust Funds. For example, if the maximum taxable earnings amount had been raised in 2005 from $90,000 to $150,000—roughly the level needed to cover 90% of all earnings—it would have eliminated roughly 40% of the long-range shortfall in Social Security. If all earnings were subject to the payroll tax, but the base was retained for benefit calculations, the Social Security Trust Funds would remain solvent for the next 75 years. However, having different bases for contributions and benefits would weaken the traditional link between the taxes workers pay into the system and the benefits they receive.
This report doesn't address the possibility of keeping workers' contributions at 4% AND expanding the wage base, but I'm betting some combination of the two would serve the purpose of maintaining solvency while spreading out the contributions in a way that is more progressive.
But no. The Very Important Commentators have other Very Important Thoughts on The Subject.
If we don't [cut boomers' benefits], we will be condemned to some combination of inferior policies. We can raise taxes sharply over the next 15 or 20 years, roughly 50 percent from recent levels, to cover expanding old-age subsidies and existing government programs. Or we can accept permanently huge budget deficits.
Again I say, bullsh*t.
Medicare is indisputably expensive. How can it not be when it covers everyone insurers wouldn't touch with a ten-foot pole? Elderly and disabled people are not going to be cheap, and it's not going to get any cheaper when we've got returning disabled veterans needing care from the Veterans' Administration either. The correct answer for Medicare is one that most progressives have embraced for years: Allow others to buy into it.
Here's the theoretical buy-in plan I always thought would work best. It phases in buy-in opportunities and opens a door for those who cannot afford insurance now and will be eligible for federal subsidies later.
Continue reading »