Thursday, March 07, 2013

No time to cut entitlements

And for the love of all that is holy, please stop calling them entitlements. They're earned benefits dammit. Still, Thomas B. Edsall exposes the stupid in our inane national conversation about starving granny to save the wealthy a few bucks in taxes. There is a simple fix to "save" the programs:
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. 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.
Read it all if you love the maths, but the shorter is Medicare can similarly be made solvent by simply reworking the contribution ratios. And no, raising the starting age for earned benefits is not the answer:
In the case of Social Security, proposals to raise the age of eligibility for full benefits amount to a benefit cut of 6 to 7 percent for every year that eligibility was increased.
Which brings us to why the current conversation is so stupid:
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.

The Washington cognoscenti are more inclined to discuss two main approaches that are far less costly for the affluent: means-testing of benefits and raising the age of eligibility for Social Security and Medicare. (Sidenote: policy makers and national journalists who weigh in on this issue generally earn more than $113,700 a year.) ...
I'd add most of them are making far in excess of that figure. Also, too:
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.
Good to see NYT publishing this but must credit Atrios for getting there first.

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