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View Diary: What I Keep Not Hearing About Medicare (182 comments)

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  •  cherie clark - there is no cap on Medicare (8+ / 0-)

    and as you note investment income will now also be taxed for Medicare starting 1/1/13.

    Your proposal for SocSec would end the program as it was intended and has operated to this point. It was designed as "wage insurance" with its own funding mechanism and not funded by general tax revenue. It is not an income redistribution plan, but rather a program where people earn a benefit by the contributions they make into the system, as well as their employers. There is a reason why there is a cap. The thought is that people at higher incomes likely have other retirement assets and don't need to "insure" all of their income. Investment income isn't included because investment income isn't tied to employment and doesn't end when we retire. Therefore, there is no logic to "insure" it. There are two issues with eliminating the cap, one is that if all the extra income is included the benefit formula, SocSec payments to very high income earners could be six figures per year. If you take the cap off of contributions, and cap the benefits, you have changed SocSec as we know it and violated every principal that FDR set out for it when it was started. The program shares such bipartisan support because people think it is fair and your benefits are tied to your contributions. That link cannot be broken or you have an income redistribution program that FDR warned us would be perceived as welfare, he called it the "dole".

    I favor raising the cap, and allowing benefits to rise to reflect the higher contributions. A staged increase in the cap solves nearly all of SocSec's financial problems.

    "let's talk about that"

    by VClib on Fri Oct 12, 2012 at 03:45:29 PM PDT

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    •  You just made me learn something! nt (4+ / 0-)
      Recommended by:
      VClib, NWTerriD, marina, cherie clark

      I was wise enough to never grow up while fooling most people into believing I had. - Margaret Mead

      by fayea on Fri Oct 12, 2012 at 04:27:44 PM PDT

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    •  How much would it help? (2+ / 0-)
      Recommended by:
      NWTerriD, cherie clark

      I don't know enough about SS finances to know how much raising the cap and benefits would help.

      Numbers are like people . . . Torture them enough and they'll tell you anything.

      by Actuary4Change on Fri Oct 12, 2012 at 07:38:17 PM PDT

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      •  A4C - I don't know the math (0+ / 0-)

        But the system stays in balance if about 90% of wages and salaries are subject to withholding. We are now in the low 80s. We need to stair step the amount up until we hit 90%. That might require us to take the cap close to $200,000. The current maximum cap is $110,000 and the max benefit is under $3,000/mo. If someone had 40 quarters at $200,000 plus my guess is that the benefit would be about $5,000/mo. There are some formulas on the SocSec website to play with and you are just the type of person with the expertise to work on a few examples.

        "let's talk about that"

        by VClib on Sat Oct 13, 2012 at 10:46:42 AM PDT

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    •  That is fine too, it would be nice to raise (1+ / 0-)
      Recommended by:
      VClib

      benefits because the average benefit barely keeps one above the poverty level. What makes me crazy is this idea it can't be fixed. I did know that there was no cap on medicare just forgot., one of the reasons I retired, memory issues. I paid in for 56 years, from the time I was 12 years old and it isn't an entitlement, someone needs to drive a stake thru the heart of that meme. When you work and pay into a benefit it isn't the DOLE, it isn't a hand out, it is a contract we make with the government. Simpson Boles saw the merit in raising the cap and raising the monthly benefit amount to something that would allow seniors to retire with dignity.

      •  cherie - I think there are two issues (0+ / 0-)

        We completely agree that SocSec is an earned benefit.

        The issue of raising the monthly payment at the bottom is expensive and complex. The formula that determines benefits is currently modestly weighted in a progressive fashion, that is a low income person receives higher benefits per dollar contributed than a person contributing at the cap amount. There is certainly strong support from Dems to tweak the formula to make that low income benefit higher, but it is very expensive because of the sheer number of SocSec checks that go to people who were low income workers. I would hope that if we significantly raised the cap, say from $110,000 to $200,000 over the next ten years, that we could continue to shave some return on those higher income participants and bolster the current and future benefits to lower income workers.  

        "let's talk about that"

        by VClib on Sat Oct 13, 2012 at 10:54:12 AM PDT

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