OK, here’s how to fix Social Security and Medicare. However, nobody will like it, whether you’re 25, 45, or 65 years old, because benefits need to be cut across the board. Everybody needs to make a sacrifice. (“Does not man have hard service on earth? Are not his days like those of a hired man?” Job 7:1).
So far, most suggestions for saving Social Security and Medicare include the following:
1) Raising the full retirement age for Social Security to 70, and / or raising the early retirement age from 62 to 65 (phased in over five to ten years).
2) Raising (or removing) the salary cap on the amount taxed by Social Security.
3) Increasing the Social Security tax from its present level of 6.2, and the Medicare tax from its present level of 1.45%.
4) Changing the Social Security indexing formula from wage growth to price inflation.
However, I suggest a more radical (and fairer) approach, without raising taxes. Here’s how it would work:
1) Social Security–Cut benefits across-the-board: Decrease all Social Security benefits by 10%. For those who are currently receiving Social Security benefits, ages 62 and above, the cut is immediate. For those not yet receiving benefits, the anticipated benefits will be cut as soon as they become eligible; i.e., decrease the estimates on their annual statements.
2) Social Security–Implement Fairness Testing: At the point where a person has received as much as he has contributed, decrease the benefits by an additional 10%. (Many retirees get back their entire contributions in about five years, and then reap another 300% of that amount over the subsequent 15 years.)
3) Social Security–Implement Means Testing: At the point where the person’s other income exceeds twice the amount of their Social Security benefit (after he has received as much as he has paid in), decrease the benefits by an additional 10%. In addition, continue to cut the benefit by 10% increments, completely phasing out the benefit if the person’s other income exceeds $500,000.
|Current Social Security||After Immediate Cut||After Fairness Testing||After Means Testing||Other Income||Previous Total Income||New Total Income|
4) Apply these same fairness testing and means testing to Medicare. Those who have already collected more from Medicare than they contributed, and who have substantial other means, would pay an additional 10% deductible, with a reasonable cap–maybe $10,000 per year. This would encourage beneficiaries to take control of their own health care and reduce the many unnecessary and costly tests and procedures.
I would like to see a CBO estimate on the savings that this proposal would generate. I’m sure that the exact amount of the cuts suggested (10%, etc.) could be massaged in order to make these programs solvent again.
This proposal hurts everybody, across-the-board, and somewhat fairly, because it does indeed affect everyone. Unfortunately, if we want to fix these programs, everybody is going to have to make a sacrifice.