Friday, February 17, 2012
Missiles are pointed at Social Security and Medicare, the broad-based programs for older Americans. Some are stealth missiles. Some are misguided missiles. But both parties are pointing them.
Democrats and Republicans insist that their monkeying around won't put either popular program in jeopardy. They only talk of fairness and helping those of modest means. In truth, their weapons have been put at the service of agendas not directly related to the programs, and frankly, not good for them, either.
Since the beginning of 2011, American workers have enjoyed a "temporary" 2 percentage point cut in their payroll taxes covering Social Security. President Obama wants to extend the payroll tax holiday to the end of this year. This kind of tax break does put more dollars in working people's pockets and so provides an economic stimulus.
But astute observers know that such discounts can eventually lead to more anxiety than pleasure because they undermine what the program is really about. The payroll tax provides the money to cover Social Security benefits now and in the future. Under this setup, workers and their employers entirely fund the program. Thus, it is not welfare at all. Social Security is an earned benefit . You paid for it. That means no one can make a moral argument for taking that money away from you (not that some don't try).
If you want to undermine Social Security's moral foundation, a good approach is to reduce payroll taxes and replace the lost revenues with money from the Treasury. That is what the Obama administration is doing, with bipartisan help.
So while the dollars may be there, they are no longer all coming directly from the workers and employers. That means Social Security is no longer entirely self-funded, opening gaps in the program's defenses against those who would sink it.
Also, any extended holiday stops feeling like a holiday after a while. It feels like the way things have always been. And so when after two years the leaders call for restoring the old tax rate, the program's foes (and some friends) cry "tax hike." As a result, it will get harder and harder to return Social Security to its formerly pure state of self-reliance.
As for Medicare, Republicans want rich folk to pay more for their coverage, and President Obama says he's open to the idea. Now that sounds eminently fair: Rather than chop away at the benefits, make the affluent elderly pay more for theirs.
Big problem: Medicare was created as a government health insurance plan for older and disabled Americans -- regardless of economic status. Asking richer groups to pay more for their benefits reduces the program's value to those, sorry to say, with the most political clout.
And the program already contains a good deal of means testing. For example, Medicare Part B, covering doctors and outpatient visits, already charges stiffer premiums to those with higher incomes.
Republicans now talk of asking full freight from those earning more than $1 million. Of course, they can afford it -- but again, they'll start caring less about the program. As Medicare loses its universal character, politicians will find it easier to chip away its value for those with money. Eventually Medicare turns into Medicaid, a welfare-like plan for the poor.
If you want the rich to pay more of Medicare's costs, that's easy. Simply raise their income-tax rates. The Treasury, which depends on income taxes, already pays for 75 percent of the Part B premium.
It's important to keep Social Security and Medicare honest, simple and universal. Policies that weaken any of these attributes can eventually threaten the whole deal.
COPYRIGHT 2012 THE PROVIDENCE JOURNAL CO.
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