Of course, because they solve any long-term solvency problems without making people who receive Social Security or Medicare suffer tremedous pain, they are outside the scope of the beltway and pundit discussions. They are not on the table because only severe pain inflicted on Americans constitutes a serious plan.
Today, Thomas Edsall, in a New York Times article entitled "The War on Entitlements," describes how to solve long-term solvency issues without gutting the benefits people need (and which they paid for over a lifetime of work with a very regressive tax)
First, we must face some key facts. Many in Washington DC refuse to look at the hard facts, but we will:
1. "Two-thirds of Americans who are over the age of 65 depend on an average annual Social Security benefit of $15,168.36 for at least half of their income."
2. "Currently, earned income in excess of $113,700 is entirely exempt from the 6.2 percent payroll tax that funds Social Security benefits (employers pay a matching 6.2 percent). 5.2 percent of working Americans make more than $113,700 a year."
What does that mean? Many folks are dependent on their social security income for basic necessities, and if you cut benefits, as many pundits think is necessary, many real people will suffer real pain.
But if you eliminate the cap, problem solved for 75 years, which is pretty damn long time:
Simply by eliminating the payroll tax earnings cap — and thus ending this regressive exemption for the top 5.2 percent of earners — would, according to the Congressional Budget Office, solve the financial crisis facing the Social Security system.
Well, that was pretty easy.
But what about Medicare? Surely we must put poor elderly people on melting ice floes (because of global warming there are plenty available, thanks Exxon) and send them off to sea to die before they use up Medicare funds to stay alive another paltry 10 or 15 years, right?
But long-term Medicare solvency issues also can be solved.
Medicare, in turn, is financed by a flat 1.45 percent tax on the first $200,000 of earnings for a single person and $250,000 for a married couple, matched by the employer, after which it rises by a modest 0.9 percent on all income above the $200,000 and $250,000 levels.Instead, the only options for most beltway pundits seem to be how deep the benefit cuts should be. Making folks starve or just suffer malnutrition? Making elderly people choose betweeen food and health care?
Cutting benefits is frequently discussed in the halls of Congress, in research institutes and by analysts and columnists. The idea of subjecting earned income over $113,000 to the Social Security payroll tax and making the Medicare tax more progressive – steps that would affect only the relatively affluent — is largely missing from the policy conversation.
Why is that?
Theda Skocpol, a professor of government and sociology at Harvard and an authority on the history of the American welfare state, contended in a phone interview that policy elites avoid addressing the sharply regressive nature of social welfare taxes because, “at one level, it’s very, very privileged people wanting to make sure they cut spending on everybody else” while “holding down their own taxes.”There is plenty of room for more revenue:
Federal tax revenues in 2009, 2010 and 2011 have been 15.1 percent, 15.1 percent and 15.4 percent of Gross Domestic Product, lower than any level since 1950.Yes, we have a taxing problem. Taxes are too low and especially so on the wealthier folks. It's just another aspect of class war that the rich have waged on the rest of us:
Elite anxiety over entitlement-driven budget deficits and accumulating national debt has created a powerful class in the nation’s capital. The agenda of this class is in many respects on a collision course with mounting demands for action by those lower down the ladder to address the threat to government social insurance programs. Intransigent opposition by the better off and their representatives to raising the necessary revenue means that not only Social Security and Medicare face a budgetary ax.It's an excellent article, well worth reading in its entirety. There is much more, incuding cool graphs.
In this kind of conflict over limited goods, one of the most valuable resources that can get lost in the fray is the wisdom of the electorate at large. In this case, the electorate is pointing toward progressive tax increases for those closer to the top far more readily than members of the political class, for whom high-earners are a crucial source of campaign contributions.
Even if one does not go all the way (raise the cap for social security rather than eliminate it; smaller increases to the progressivity of medicare tax), these are clear solutions that can help continue the viability of the programs for the foreseeable future. They are not on the table for the most part because Republicans do not seek defict reduction, they seek the destruction of the New Deal and Great Society (of which Medicare was a key part).