Sunday, June 26, 2011
Social Security benefits would be cut immediately in August or September if there were no debt ceiling extension (CNN)
A discussion on CNN “Your Money” this weekend (Saturday and Sunday) confirmed that, if Congress fails to raise the debt ceiling Aug. 2, 2011, draconian cuts in existing benefits to seniors would go into effect immediately, including social security checks and Medicare benefits even that month (or Sept., since Social Security pays a month behind) in 2011.
The government would have to “balance the budget” right on the edge of the dime, the show said.
There might even be time to figure out a “means testing” formula. Government worker layoffs and furloughs would happen, the stock market would take a hit, and people would even be much less wealthy.
But some conservatives believe ordinary Americans need a “shock treatment” now to learn to live within their means.
And I had a conversation this morning suggesting that most conservative believe that the failure to raise the debt ceiling would cause long term harm. But some people would have to sacrifice. My own personal experience in talking to people is that many don’t believe the debt ceiling problem is “real” so GOP politicians get away with pretending it isn’t.
Again, Democrats say that the main issue is GOP refusal to raise any taxes on those already wealthy (so they don’t sacrifice, they take care of everyone else!)
The “means testing” would have to address two questions as to social security:
(1) Given that the Social Security Trust fund actually belonged to Social Security (which it doesn’t – that’s the problem in point (2)), how much of a benefit amount is accounted for by his or her FICA tax contributions (and his or her employers’, which otherwise could have been paid as wages, so they are indirect contributions from the beneficiaries anyway). Take the self-employment tax into account, too, in answering the question. The percentage might approach 100% except for the longer life spans, and the ability of medicine (supported by Medicare) to prolong life spans so indefinitely in some cases. So benefits could be cut immediately (but relatively slightly) based on life span increases.
(2) Given that the Treasury spent a lot of the Social Security trust fund through IOU’s and no longer has the money, how much should be taken out of seniors’ benefits to pay this back? It sounds like stealing, or maybe more like how bankruptcy works, doesn’t it. Or another way to look at this is to say that a good part of the FICA tax was not really an “annuity premium” but a general, however regressive, tax. If so, how much of it? Perhaps 1/3 of benefits have been lost this way.
Another obvious question is, why do we have a FICA-tax break this year when we have such a debt issue, and increasing questions of Entitlement Solvency (Social Security and Medicare)? True, it’s a stimulus or sorts. Can we afford it? That tax break could obviously go away in August.
Some social conservatives (the “natural family” camp) want to exist parents with large families from some FICA taxes.
AARP has a YouTube video that opposes means testing here. I’ll look for some other videos.