The Deficit Commission Plan -- 1

The Chairmen of the deficit commission are out with a proposal that has not been adopted by that panel. They apparently have issued the proposal since they cannot get the votes of their fellow panel members to make it an official determination of the commission. Even so, the proposal merits serious discussion.

There is no reason to review the perilous state of the federal budget; everyone who has been conscious the last two years knows that spending is out of control and revenues come nowhere near paying for what is being spent. Further, social security, medicare and other entitlements are growing at such rapid speed that each of these programs will soon be bankrupt.

The chairman of the commission start with perhaps the easiest of the entitlement fixes: Social Security. When the program was originally passed in the 1930's, the concept was that the government would collect payroll taxes from individuals and return those funds to the same individuals when they retired at age 65. Of course, this structure was abandoned long ago as Congress found it politically beneficial to raise the payouts above the amounts actually collected and to lower the retirement age to 62. In order to meet the required payment amounts, congress began using all of the payroll taxes collected. This transformed the program from repayment of a pension paid in by the retiree while he or she worked to a welfare program for seniors that guaranteed ever higher incomes to retirees. Now that the number of workers has fallen in realtion to the number of seniors, the money is running out.

The chairmen of the commission propose raising the retirment age to 68 by 2050 and even higher in the years after that. This is a very realistic change. After all, the life expectancy for individuals was much less in the 1930's when the 65 year age level was set or in the early 1980's when the current 66 age level was set. If the program is to remain sound, the true life expectancy has to be considered.

The chairmen also propose changing the method used to determine cost of living increases for benefits; the suggest using price inflation rather than wage inflation as the basis for that calculation. this is a modification that would remedy a give away that was adopted many years ago. For many years, social security receipients got bigger cost of living increases than the actual increase justified. It is hard to see how one can oppose bringing the COLA's into line with actual inflation. Oh there will be some who yell and scream how they are being penalized, but unless and until someone can explain why seniors should get ever larger payments from the government at the expense of everyone else, the changes in the COLA's should be made.

The last part of the chairmen's proposal is to hit the wealthy. these folks are to pay the payroll tax on a higher amount of their earnings. Beyond that, benefits for those who are wealthy are to be reduced under the proposal. So the wealthy will pay more but get less. While the
wealthy may not like this change, it is a change needed to keep from having to reduce benefits to seniors. It also should be adopted.

One last note: the chairmen propose making no changes to the social security payments of those who are 55 or older. One might validly ask why this should be. Are the current group of folks somehow better than those who are coming down the pike later? Clearly the answer is no. this is just a political move to keep the seniors quiet as benefits for the younger people are cut back. Personally, I think this is crazy. there is no reason why current seniors should be exempt from the proposed changes.