It’s galling to hear all of the ideas coming forward about the Social Security and Medicare programs as these are not appropriated programs. These programs are funded by the people of the United States through the Federal Insurance Contributions Act (FICA) tax.
The people’s problem is not with the programs but with their politicians who have diverted the “trust fund” monies (take the cash from the tax assessment into the general funds, then Treasury issues a nonmarketable bond for that amount and puts it into the Social Security trust fund). When the Baby Boomer generation was in their active working years, there was a lot of money in the Treasury. Given the composition of the U.S. government revenues, the amount of money that was seen as excess may have been from FICA monies. If that were the case, the money should not have funded “tax cuts” or any other programs unless a method of repaying the funds was known.
The government did not preserve the excess funds to provide for the inevitable cash-in period occurring now, and so now there are calls to address the need for cash as the nonmarketable bonds are being reached to fund Social Security beneficiaries. One way is to raise revenues on those who received cuts based on the excess FICA monies. The group Third Way proposes another confusing, complex, and ultimately unhelpful solution geared to undermine confidence in the programs while using magnificent words to describe the program. I hope to evaluate each major point the Third Way group identifies in its documents over future posts. I’ll start with their first point.
- Change formula to increase benefits for low income seniors (that is, to change primary insurance amount from 90% to 95%, decrease it from 32% to 31% in the middle bend point, and from 15% to 12% in the third bend point). This solution is complicated and does not net much money to be worth the change. The increase provided by 95% of $749 is not that much more (0.9 x 749 = 674.1; 0.95 x 749 = $711.55. The result: 711.55 – 674.1 = 37.45 (increase). Thirty seven dollars and some change would not go very far with today’s cost of living.