That's just not true with regards to Social Security. 100 years of projected life before dragging on other Federal finances and one major reform so far (another will be needed) is usually the sign of a successful government program. It's not in dire crisis: we will start to see it drag on other government finances in 20 years, as FICA will only fund about 75% of payouts once the trust fund is exhausted.
Medicare on the other hand is a different story. Costs are growing too high to make it sustainable. But that doesn't have to do with the efficiency of the program itself vs. other insurance companies - it's actually quite a bit efficient than private insurers. The problem seems to be the broader U.S. system of health cost/benefits compared to other countries. We spend more and get less.
That seems like a problem for the regular budget to sort out: Soc. Sec. basically has the money it needs for some decades, but the rest of the budget either needs significant cuts or tax hikes so that it can pay back Soc. Sec. what it owes it.
I don't think it's an acceptable option to retroactively say that some of the Soc. Sec. taxes won't be paid back to Soc. Sec., and just kept for the general fund. If that happened, then it's basically been a regressive income tax all along, contrary to Reagan's assurances in 1983 that he wasn't making a regressive change to the tax code, because of the bonds. If that is likely to happen, then at least the regressiveness should be fixed ASAP by removing the $110k cap, because the only justification for the cap is that the money is earmarked for Social Security.
> That seems like a problem for the regular budget to sort out
I agree. My point is that the problem exists now.
> I don't think it's an acceptable option to retroactively say that some of the Soc. Sec. taxes won't be paid back to Soc. Sec.,
I didn't suggest default. I'm just pointing out that the "drag" has already started.
> and just kept for the general fund. If that happened, then it's basically been a regressive income tax all along
It's not a regressive tax because of the payout is capped too.
In fact, it's actually a progressive tax because of the way that payout works. The ROI for folks who pay the minimum is pretty good. The ROI for folks who hit the cap is horrible.
That said, some subgroups do worse/better than others. The worst is probably black men. They don't live long enough to get the payouts. I think that white women are the big winners.
> If that is likely to happen, then at least the regressiveness should be fixed ASAP by removing the $110k cap, because the only justification for the cap is that the money is earmarked for Social Security.
Actually, the designers of SS put in the cap because they thought that it was the best way to protect SS from political fights.
Are you planning to remove the benefits cap as well? If not, it's just another tax and rich people are going to care. SS's designers wanted rich people to ignore SS.
If you do remove the benefits cap, then you get to explain why Ross Perot gets $400k/year in benefits.
I think that SS's designers got that part correct. The payout formula needs some tweaking.
Re: removing the cap, that was in the case, which is vaguely proposed on and off, that Social Security will never get the money back from its mythical "lockbox", and instead the money will be retroactively turned into just general-treasury money. If it's just general-treasury money, then the Social Security tax is a general-revenue tax (not one earmarked for Social Security benefits), but as a general-revenue tax it's a regressive one.
If the money really is going to be repaid to the Social Security system and used exclusively for benefits, then I agree it's a different situation, more of a quasi-retirement-account.
> but as a general-revenue tax it's a regressive one.
SS is not a general revenue tax - taxes don't have contribution-based payouts.
If you're suggesting that SS payouts should be completely means tested, you're opening the biggest can of worms. The SS recipients that complete means testing would most affect are among the most politically active people in America.
When I was younger, I used to argue against SS and the like as old-people welfare. I didn't see why my money should go to to folks who were better off than me. My age-cohorts disagreed.
> SS is not a general revenue tax - taxes don't have contribution-based payouts.
Did you miss this part of my comment?
> in the case, which is vaguely proposed on and off, that Social Security will never get the money back from its mythical "lockbox", and instead the money will be retroactively turned into just general-treasury money
Especially in the last Social-Security-reform debate a few years ago, there were serious proposals that the Social Security tax surplus notionally held in bonds will never be repaid to Social Security, and therefore reform proposals should be made which allows SS to be solvent under the assumption that it will never get its bonds repaid.
If that happens, a significant part of the past 20 years' Social-Security tax money will not be used for SS payouts, but will be kept by the general treasury. In that case, SS will retroactively have been, in part, a regressive general-revenue tax.
If 100% of the Soc. Sec. money collected is eventually used to pay Soc. Sec. obligations (i.e. SS is able to call its bonds), then my argument doesn't apply. I'm not confident that will happen, though.
> I don't think it's an acceptable option to retroactively say that some of the Soc. Sec. taxes won't be paid back to Soc. Sec.,
I didn't suggest that. I'm just pointing out that the "drag" has already started.
> and just kept for the general fund. If that happened, then it's basically been a regressive income tax all along
It's not a regressive tax because of the payout is capped too.
In fact, it's actually a progressive tax because of the way that payout works. The ROI for folks who pay the minimum is pretty good. The ROI for folks who hit the cap is horrible.
That said, some subgroups do worse/better than others. The worst is probably black men. They don't live long enough to get the payouts. I think that white women are the big winners.
> If that is likely to happen, then at least the regressiveness should be fixed ASAP by removing the $110k cap, because the only justification for the cap is that the money is earmarked for Social Security.
Actually, the designers of SS put in the cap because they thought that it was the best way to protect SS from political fights.
Are you planning to remove the benefits cap as well? If not, it's just another tax and rich people are going to care. SS's designers wanted rich people to ignore SS.
If you do remove the benefits cap, then you get to explain why Ross Perot gets $400k/year in benefits.
I think that SS's designers got that part correct. The payout formula needs some tweaking.
Medicare on the other hand is a different story. Costs are growing too high to make it sustainable. But that doesn't have to do with the efficiency of the program itself vs. other insurance companies - it's actually quite a bit efficient than private insurers. The problem seems to be the broader U.S. system of health cost/benefits compared to other countries. We spend more and get less.