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Social Security & Medicare Solutions
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Following are solutions that will solve the Social Security and Medicare funding problem.
Solution One: Stop giving Social Security and Medicare benefits to the rich! I am not sure just where the line should be drawn but if someone has a net worth in the millions they should be able to live just fine without getting social security payments and they should also be able to purchase their own medical insurance.
The rich sometimes say "I paid into it so I should get the benefits". That is just plain greed and nonsense! I have paid a lot of income taxes but I don't get food stamps. Laws many have to be changed and they should be changed. Some say the rich not getting Social Security and Medicare benefits would not make a huge difference but it would for sure help.
Solution Two: The Social Security tax deducted from ones pay check should not stop once the threshold amount is reached ($106,800 in 2011). The Social Security payroll tax deduction rate is 6.2%. High paid employees that reach the threshold amount before the end of the year do not have to pay the 6.2% for the remainder of the year. For example, someone with a $250,000 income will pay an effective rate of only 2.6% of their total income. Most employees earn less than $106,800 and have to pay the Social Security tax for the entire year. If they can afford to pay it all year then the high income folks can also afford to pay it all year. The Medicare deduction of 1.45% is deducted all year regardless of income.
Note: For 2011 the social security deduction rate is decreased to 4.2%. This is supposed to be a temporary decrease to help stimulate the economy so the rate may go back to 6.2% in 2012
Employers would not be happy as they have to match what the employee pays so they would have to pay more for high income employees. Politicians use the augment that if businesses have to pay more taxes they will hire less people and it will run some of them out of business. Nonsense! That is just a scare tactic so they can protect the companies that give them big donations.
Most rich people do not receive their income from pay-roll checks and pay little, or no, Social Security and Medicare tax. Social Security and Medicare taxes do not have to be paid for income from interest, dividends, capital gains, rents and royalties - how many rich earn their money. Social Security and Medicare taxes should also be applied to these income types even if they manage to pay no income tax. The rich have all kinds of tax loop holes that allow many to pay no, or little, income tax. Those loop holes need to be closed but they all need to pay Medicare and Social Security taxes even if they are able to use loop holes an pay no income tax.
Solution Three: The sky is falling, the sky is falling, the Medicare and Social Security trust funds are running out of money! There have been various projected dates when these funds will run out of money. That is all hogwash! There are no such trust funds, it is just an accounting gimmick that predicts when the expenditures for Medicare and Social Security will exceed the amount collected from Medicare and Social Security taxes. These taxes do not go into a trust fund, they go the same place that all other taxes go. Expenditures for Medicare and Social Security are no different than expenditures for the military or for building highways. The money for all federal government expenditures comes out of the same general tax revenue account. If the politicians want to balance Medicare and Social Security spending with the amount collected from Medicare and Social Security taxes then they simply need to increase those tax rates a little. If all of the solutions recommend in this article are implemented a Medicare and Social Security tax increase may not be necessary.
Solution Four: DO NOT Privatize Medicare. One reason the Obama Health Care law is not a good law is that the health insurance companies pretty much wrote the law so they would get more business. Insurance companies give huge donations to politicians and they would love to see Medicare privatized. Congressman Paul Ryan is a leading proponent of privatized Medicare. It is probably no coincident that his largest 2009-2010 contributor was an insurance company. His plan of providing vouchers instead of Medicare would be a fantastic windfall for the health insurance companies.
On the surface, a voucher system does not sound bad because each senior could chose their own insurance. Paul Ryan says that the total cost to the government will be less. If you believe that I have some lake-front property in the middle of the Sahara desert I would like to sell you.
A 2006 study determined that Medicare administrative costs where about 2% and private insurance administrative costs were in the 15-20% range. Tell me how privatized Medicare is the way to go when private insurance administrative costs are up to 10 times that of Medicare. Medicare and Social Security may be the only government programs in the history of our country that have actually operated rather efficiently. Privatizing Medicare would be a big basket of golden eggs for the insurance companies but a terrible thing for seniors!
There has also been talk of privatizing Social Security. The theory is that if the Social Security funds were turned over to investment managers, similar to a pension fund, they would invest the money and increase its value. Unfortunately they could also invest it poorly and decrease its value. Investment managers make a lot of money in fees and commissions but the don't necessarily make money for you. History has shown that the success record of investment managers is about 50-50 - no better than flipping a coin. Their main interest is making money for themselves.
There has also been talk about giving each person the money they have paid into Social Security when they reach retirement age. Then they could invest it as they see fit. That is a really terrible and crazy idea. While a few people can invest wisely and make money, the vast majority of individual investors lose money.
The existing Social Security plan may not be a bonanza but it can continue to be safe and reliable if our law-makers take these suggested steps and don't do something really stupid.
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