OK, so last week we disabused our readers of the conspiracy notion, yet agreed that the Social Security system needs maintenance. What does that even mean?
The Deficit Reduction Commission, established by President Obama, is the closest thing to a bipartisan example we’ve got, so let’s look at its opinions:
Recent media attention on “today’s seniors” come from this commission. This is because it realized that it’s working on a 75-year timeline. Let’s ignore the idea that changing benefits for existing beneficiaries would be politically unwise- it’s good the commission is taking the long view.
The commission brought us the idea of “means-testing.” In other words, those with other income sources receive different, lower benefits. In other other words, the rich get less. The statistics don’t sound quite as appetizing- under the proposed formulas, 94% of beneficiaries would receive a cut in benefits, and 80% of those in the lowest tier of income receive a cut. In other other other words, there may not be as many fat cats as we thought.
On the other hand, the commission brought us some palatable options:
– phase out the cap on payroll subject to Social Security tax (currently $110,000)
– phase in a rise in contribution rate (read “tax”) by .05% /year for 20 years
– subject existing contributions to payroll tax, which they aren’t now
Down side? In the purest reading, these are all “tax hikes.” Form the opinions you like, but let’s at least have math behind them.
Dennis Crowley, MBA