The Washington Post, February 15, 2012
Obama’s budget guts the government
by Robert J. Samuelson
Mr. Samuelson writes a weekly economics column. He was
a columnist for Newsweek magazine from 1984 to 2011. He opines:
...
But the second story has gotten only
modest attention. It is how spending on the elderly is slowly and inexorably
crowding out the rest of government — and creating enormous pressures for
future, steep tax increases.
...
Here are the next decade’s projected trends: Spending on Social Security
rises 27 percent ... Neither Republicans nor Democrats want to discuss
this openly. ... An avowedly liberal administration is gutting government
because it lacks the political will to confront programs for the elderly.
... Granted, none of the political choices (limits on
Social Security and Medicare benefits, deep discretionary spending cuts,
much higher taxes or large deficits) is appealing to either party. But
instead of a real debate on the size and role of government — which programs
are important, which are ineffective, who deserves benefits, what’s a
tolerable level of taxation — we are making choices by omission in a way
that exempts the elderly.
2-4-8 Response:
Social Security and Medicare
The projected 10-year growth of Social Security (about
25 billion a year) and Medicare (about $20 billion a year) and the fact that
the government is running on borrowed money is not really a “big†story. A
new approach to solving the problem might be. Lowering the amount of
benefits is not very popular with those already living near the poverty
line. Delaying the retirement eligibility age on the rational that people
are living longer is not fair to those that are less likely to live as long
(i.e. males, minorities, overweight, smokers, hypertension, etc.). When
seniors work into their golden years it also has the unintended consequence
of there being fewer jobs for younger workers.
One solution that has not been fully explored is that
of cutting back a bit on tax exempt retirement programs – (those in addition
to social security). Since the 1974
Employee Retirement Income
Security Act (ERISA) employers and workers have participated in a wide range
of tax exempt retirement programs. There are 90 million people with $17.5
trillion in retirement assets (a household median of $100,000).
A
question arises as to what public savings might be achieved by ending the
retirement tax saving holiday for those who don’t really need it. The tax
subsidy might be ended for those with private wealth that will effectively
match the maximum social security amount. It’s not that $40,000 or $50,000
would be a lavish income. Rather it is a matter of fairness to suggest that
other taxpayers should not be subsidizing more than a basic retirement life
style (I call it the Social Security times two level). By taxing surplus
accumulated retirement money that has never been taxed and by halting tax
exempt participation when that level is reached, the expanded tax base would
produce significant additional revenue. For example, it would only take an
expanded tax base of $3 trillion to produce $45 billion a year at a 15% tax
rate.
A more
stable long range solution would require a bold reform that expands the tax
base for all. I call it the 2-4-8 Tax Blend and it is described at
www.TaxNetWealth.com.
Eugene Patrick Devany, JD, MPA
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