ENTITLEMENTS—BY THE UMOC

Without hesitation I will tell you that I hate the term “entitlements”.

You might assume  since the dictionary definition of entitlement as a benefit guaranteed by law or contract matches the basis for our Social Security and Medicare programs that I am addressing here that I would embrace the term.

However the political hacks (both office holders and pundits) have hijacked the term and now spit it out as a perjorative rather than an accurate description of what entitlements entail. Admit it. Even if you yourself benefit from these programs don’t you see them viewed in a negative light when spewed out by TV or radio talking heads or see the word bannered in print?

I presented an overview of how SS and Medicare were developed and that  the withholding of money from paychecks to fund them is technically a tax. Realistically and practically those payments are the same as premiums an employee has deducted from his paycheck to provide private health insurance or build retirement accounts. https://umoc193.wordpress.com/wp-admin/post.php?post=680&action=edit

I’m not going to relitigate that issue here. You can read the above if you have further need to understand my position.

I will explain how those in and/or seeking office present their postions and offer some middle ground that: protects current enrollees; allows these programs to  continue without major structural changes; and secures the revenues into their trust funds necessary to accomplish the first two goals.

“What a drag it is getting old”, sang the Rolling Stones eons ago before they themselves gathered the moss…and patina…of senior citizenship. I, too, belong to that generation and participate in both programs, unashamedly so.

The Trustees of Medicare and SS are required to issue annual reports projecting their health. From the April 2012 release:

Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare. If they take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare. Earlier action will also help elected officials minimize adverse impacts on vulnerable populations, including lower-income workers and people already dependent on program benefits. http://www.ssa.gov/oact/trsum/index.html

That’s official so I will neither bore you nor insult your intelligence by claiming no changes should be forthcoming.

With respect to entitlements as a 2012 campaign issue, there is much more rhetoric than meat for consumption.

Social Security may be subject to compromise with a mixture of raises in the age for qualification and adjusted payouts that have more meaning for future recipients than for those, like me, already receiving monthly checks (or direct deposits).

However, among Republicans there remains an undercurrent that a major overhaul of and the proper cure for SS deficiencies is to place future enrollees at the mercy of Wall Street. In other words let people make their own investment decisions. Sorry but that will result in the equivalent of far too many folks making a trip to Vegas believing themselves the equal of Phil Ivy at the Texas Hold ‘Em tables but who end up selling their hair to a wig shop.

Social Security was never designed nor intended to be a high risk/high reward endeavor. It is an insurance program where our citizens trade autonomy over their paycheck deductions for a guaranteed return and assured income in old age. Yet they are free to also invest in 401(K)’s or IRA’s or other investment vehicles where, if done properly and with some luck, they can expect a far more financially comfortable retirement. But if those fail or yield little income, folks have that safety net available.

The alternative is that, if SS is privatized, enough people will lose their money that pressure will be generated to provide government assistance on some level. Why eliminate that assistance now only to restore it later?

Admittedly Dems have not really produced a viable option to confront the facts that we have an aging population and health care costs are out of control no matter the source for their payment.

Paul Ryan has led the way on the other side in terms of reforming Medicare. He proposes to have future enrollees be pushed into private health insurance  and have the federal government subsidize their premium payments. (Now why this mandate is okay but the one in the ACA is not…oh, hell…I’m tired of talking about that aspect.)

In effect that means that your payroll withholding…premiums…for your Medicare now means nothing when you become eligible. At this time I know with reasonable certainty what my monthly premium will be once I’m enrolled and the yearly increases I will face. In the private market, there is no control over that and the subsidy you receive probably will not cover these premiums.

Then you’re SOL.

There is also talk of raising the age of eligibility for full benefits for both programs and reduced payments for SS.

I have an easy solution to pumping more money into these trust funds, one that will mean less pain in the long run for Medicare and for SS will not affect the vast majority of Americans.

Currently the SS tax is due only from those with incomes up to about $110,000/year. Raise the income limit to $250,000. That level encompasses relatively few taxpayers.

Currently neither the SS nor Medicare taxes apply to those whose income derives solely from capital gains, interest and dividends, such as Mitt Romney. Subject them to that tax at least to the income limit of $250,000.

The Medicare tax stands at 1.45%. That is paid by both employee and employer. Increase that to 2.45%.

I do not have the means to crunch the numbers as to how revenues will rise, but I believe it should be significant enough to forestall more drastic actions. The hike in Medicare tax may be slightly painful in the present. But with the other proposals on the table that would privatize the program, this is a more desirable and less expensive cure for what ails ya.

The numbers I suggest are not set in stone. Someone with actuarial acumen could produce a chart showing what the effect would be. The Medicare tax has not risen since 1986 while there have been incremental increases in SS tax over the years.

Surely securing additional financing as a certainty is preferable to going on a gambling spree so that the ideals and health of these social programs is viable in the long run.

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Comments

  • Deke James  On June 21, 2012 at 4:40 PM

    I heard on Stephanie Miller’s show the other day that GWB borrowd 4 trillion dollars from social security to fund the Iraq war. Now these neocons want to cut our ss benefits. Screw them.

    • umoc193  On June 28, 2012 at 8:07 PM

      Deke,

      I meant to correct your impression the other day but got distracted.

      No one borrows from SS for anything. The Trust Funds can legally invest only in certain U.S. securities as an investment. It does that on a regular basis according to the Trustees, not any President or administration.

      The Iraq war was unfunded in the sense that tax cuts were made both before and after the war began and of course deficits occurred and the debt increased. That situation is what Bush can be blamed for. He took no action with that war directly affecting SS.

      What Stephanie Miller claims is wrong if you presented it correctly.

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