Many posts have discussed Social Security and Medicare.
Jessica Riedl at The Atlantic:
Since the mid-1990s, Social Security trustees have warned lawmakers that insolvency was coming in the 2030s. Why are lawmakers seemingly content to wait until we reach that cliff, now projected for 2032? Because so many voters misunderstand how the system works and steadfastly refuse to accept the changes needed to fix it. Interest groups have capitalized on those fears, savaging any politician who dares to touch senior benefits or taxes. When House Republican Leader Paul Ryan proposed reforming Medicare, opponents ran a television ad portraying him pushing an elderly woman in a wheelchair off a cliff.
As policy, Social Security is not complicated. Closing the gap between revenues and benefits involves three broad levers: raising payroll taxes, hiking the eligibility age, and trimming benefit formulas for wealthier seniors. Fixing Social Security is a matter of negotiating how far to pull each lever. I’ve attended policy dinners where Republican and Democratic lawmakers quietly outlined, with relative ease, a plausible deal that would gradually raise the normal eligibility age from 67 to about 69, trim benefits for higher earners, and raise the annual earnings limit for the Social Security payroll tax to somewhere between $250,000 and $300,000.
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Social Security actuaries calculate that eliminating the wage cap (without those taxes accruing additional benefits) would keep the system out of deficit for just three years and close only about half of its long-term shortfall. So additional major solvency reforms are still necessary.
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Even liberal economists estimate that additional tax revenues begin leveling off as marginal tax rates reach the high 50s, and they begin losing money at rates somewhere between 60 and 73 percent. This leaves room to raise marginal tax rates on high earners by perhaps 6 to 12 percentage points. Raising the rich’s rates past that point may provide spiteful satisfaction but could reduce tax revenues, as high earners either stop earning additional wages or shift their compensation to lower-taxed investments or foreign jurisdictions.
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