Bob Giaquinta for Congress

Social Security and Medicare

In 2006 Social Security spending overtook the defense budget by a percentage point, 20.7% to 19.7% respectively. In third place was Medicare coming in at 12.4%. These two entitlements are the looming giants that will bankrupt the USA in the not too distant future. If there is no discussion by our leaders there will probably be a total collapse of these systems or possibly a tax revolt by the next generations. As things stand, The Government Accountability Office estimates that by 2040 every tax dollar collected will be needed to pay Social Security, Medicare, and interest on the national debt (just the interest, not reduction of the debt), no defense, or governmental functions, etc. will be able to be paid. By 2017 Medicare and Social Security will be paying out more than it is collecting.

Social Security was initiated in 1935 to aid those retiring; the life expectancy at that time was about 63 yeas of age. The money raised from these deductions was kept in a special trust fund. In the 1960's the government decided that these monies could be used as governmental income as other taxes could be used. They put an IOU treasury bill in this account, and used the funds for general governmental functions. Here's the problem, since we have run a deficit in 31 of the last 35 years, there is no money to pay these notes when they are needed, without borrowing from other countries, or imposing extremely high taxes on future generations. Also, the life expectancy is now in the high seventies. In 1977 the payroll deduction was almost doubled, and has been raised since then. The actuaries realized that since the life expectancy was higher, and that the massive numbers of "baby boomers" would eventually retire, there had to be an increase in the deductions. This in effect was a double increase in taxes, because the individual and employer had to pay the increase. The more wealthy individuals were affected less than the average worker, because there is a cap on these taxes, this cap has constantly risen and it's about 100,000 dollars at this time, any monies made above that are not taxed. This is called a regressive tax; it is more severe on lower income individuals. The government lowers income taxes and raises Social Security deductions, the monies are spent on the same things, and we get a worthless IOU in return. Who is going to pay these notes in the future? As long as the catastrophe does not occur on "their watch" our government looks the other way. Remember that senior citizens are a large voting block, and if the politicians "cross" them, re-election may not be in their future, so let's bury our heads in the sand.

None of us "older" people are going to like any of the modifications that are needed, but something must be done or there will eventually be a total collapse of the system. I know we all paid for years, and it is our right to collect, but something must be done. There has to be some monetary sacrifice. Whenever I talk with seniors I've noticed that the thing that puts a big grin on most of their faces is talking about their grandchildren. The wallet of pictures is produced, and you get a personal history of all their loved ones. Guess what, these are the very people who are going to be hurt.

A variety of changes need to be put in effect, a combination of cutting back benefits and increasing taxes, which could help to alleviate the problem;

1. Increase the retirement age
   
2. Pay Social Security taxes on more of what we earn
   
3. Change calculation of benefits-price increase vs wage increase
   
4. Reduce benefits for wealthier seniors
   
5. Change cost of living increases calculation-Consumer Price Index may be too generous.
   

Increasing taxes about 15% and reducing benefits 15% would make the program solvent for many years. A combination of these options must be exercised or the hole will only get deeper.

In 1965 President Johnson signed Medicare into law for seniors, and in1972 these benefits were extended to disabled people under the age of 65. Taxes were withheld up to $135,000. In 1993 this tax was then extended to be paid on all earned income. In 2003 President Bush added a prescription drug coverage to Medicare. This was a pre-election bill, which probably earned Bush many senior citizen's votes, which helped him defeat Kerry. The costs of this add on were to be 400 billion dollars over ten years. The administrator, Scully, of the Centers for Medicare and Medicaid Services, threatened his actuary to withhold the real costs or else. When the House was to vote, the rule that a vote could not take more than 15 minutes was broken. It lasted three hours, setting a new record. During this time threats and deal were made. The bill passed by two votes. A short time later it was announced that it cost 720 billion dollars. Mr. Scully resigned a few weeks after the bill was passed, and got a job with a lobbying firm whose top clients are pharmaceutical companies. Representative Tauzin, who was instrumental in having the bill passed, was hired as the chief lobbyist for the pharmaceutical companies. Over 75% of seniors were covered by retiree benefits, Medicaid, Medicare managed plans, and private insurance. Add to this that it was to be administrated by private insurance companies, who have to make a profit, and there was no bargaining with the pharmaceutical companies for a better deal, we are paying full price for these drugs. Another Bush sponsored brainstorm! Some believe that it was his intention to bankrupt Medicare sooner, I wouldn't put it past him.

Right now Medicare pays out more than it collects, and the costs are rising five times as fast as Social Security. Again we will not like our choices, but we have even less time to seek a cure;

1. Raise the age for eligibility
   
2. Increase the deductible then pay a percentage (for instance 20%) to a cap of expenses (for instance $5000)
   
3. Increase fees for the wealthier individuals
   
4. Renegotiate drug benefits with pharmaceutical companies
   
5. Increase outpatient care, keeping patients as independent as possible
   
6. Use hospice more for terminally ill patients
   

Part of the problem with all of our health care problems is that we are not involved when we are covered by insurance, "they" are going to pay the bill. When visiting a physician or the hospital, when do we ask about the cost, or check the bill after it is given to you, many times you never see the bill and it is so confusing that you wouldn't understand it anyway. How do we know what was charged, if the proper tests were listed, how many visits were made by the physicians, etc. If we had to pay the bill or a portion of it, I think that we would be interested a little bit more. When did we ask a physician why tests were being taken?

Federal taxes have been lowered in the Clinton and Bush II administrations, mostly benefiting the top one percent of wage earners. The Capital Gains Tax has also been lowered. The federal tax on these top 300,000 families went from 32% to 22% under Clinton, and down to 17% under Bush. The Capital Gains Tax went from 28% to 15%. I've always wondered why a person, maybe working two jobs, is taxed higher and that a person who does nothing but collect interest, pays at a lesser rate. The argument is that there is less investment, therefore the "trickle down" economics will suffer. It is my observations that it is trickling up, or to other countries. The wealthiest individuals pay a smaller percentage than middle class families. I believe that this twelve-year hiatus must be reversed. A total revamping of our tax system needs to take place. A simplified graduated tax system needs to be installed. Limiting deductions, except for children, state taxes, and interest on home mortgages, with the combination of both earned income and capital gains combined, being taxed at an increasing rate. This rate for the top wage earners should approach 50%, partially to make up for the years of almost a "free ride". The retort usually is that there are many people that pay no federal taxes, which is true. However, these people are actually paying 15% due to the withholding of the Social Security and Medicare Taxes (supposing that the employer's portion would go to the worker instead of the government). This is the same rate that the average 1% of the highest paid people pay. These actions along with a reduction of our military budget, earmarks, subsidies to farming and energy companies, and reducing the agencies such as the IRS (by simplifying the tax code) might get us back to a sound footing. We must take greed out of the equation. If and when this is achieved taxes could be lowered and a national health plan can be formulated.

These are huge problems that will only get worse if they are neglected. Let's have some discussion on these problems.

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