The Occasional Perspective - 6/12/23
Opinions and Reflections
The Debt Deal: It Ain’t Over Till It’s Over – While we may have averted Armageddon the problems the USA has with its overall debt continues to loom on the horizon. Perhaps not as much for the Boomers but for everyone else THIS IS A BIG DEAL. The USA debt load is now more than $31 Trillion dollars and there are 331.7 million citizens in the USA. Now, if you do the math (please double check me!!) – you will come up with an amazing number that each American citizen owes $107,000 dollars in overall debt to the USA government before getting to their own problems at home. And, THAT IS NOT SUSTAINABLE.
And, What About Social Security And Medicare? – Over the years there have been any number of proposals put forward for addressing the Social Security and Medicare fiscal shortfalls. But, Congress has been glacial in its response despite the fact that the last 12 Trustees Reports have pointed directly at the fact the Social Security's Old-Age, Survivors, and Disability Insurance (OASDI) Trust Fund reserves will (not maybe) become depleted between 2033 and 2035 under an “intermediate set of assumptions” provided in each report. Why? It's largely because of Left-Right politics. Meanwhile, the USA situation is facing a massive increase of stress on these programs due to the large increase in the number of aged in our society. What to do?
There are several options that focus on saving the entitlement program money with the left-leaning advocates noting that such moves are primarily focused on benefit cuts. On the right, we hear about another common proposal to raise the retirement age [NOTE: raised loudly and clearly by Candidate Nikki Haley in her recent CCN Town Hall]. At present, citizens are eligible to start collecting Social Security benefits at age 62 although an early sign-on can reduce your lifetime payments by up to 30%. In fact, if the full retirement age were shifted to 70 for future retirees about 1/3 of the SSA deficit would be wiped out.
Another option is to reduce benefits for higher-income Americans. In essence this would be implemented with a “cap” on the benefits payment structure. However, it only raises 10 – 15% of the solvency cap resources for solving the problem. Yet another option is to apply the SSA tax rate of 12.4% - which is evenly divided among employers and employees on a 50/50 basis to more than the current maximum of $160,200. If you make more than that amount, there are no further SSA increased contributions. Medicare – on the other hand – applies the 2.9% total payroll tax rate to all wages with high-income Americans subject to an additional 0.9% Medicare tax.
And, as we seemingly move more toward a “gig economy”, we should anticipate that retirement programs will no longer be a staple benefit for American workers. In 1937 when the SSA programs were created, 92% of earnings were covered but that has fallen to about 83% in the current marketplace. Therefore, in the long term, the dependency upon the Medicare and SSA programs will increase – not decrease.
In essence, ALL OF THE OPTIONS need to be put on the table and a serious debate needs to begin on the future of SSA and Medicare. This is critical when it comes to sustaining a viable health care system as well. We of the healthcare community would be well-advised to become engaged advocates in SSA/Medicare Reform so that a sustainable approach is finally offered to the American people.