Monday, November 26, 2012

It's lightbulb time!

Quick note to blog readers: It has been a couple of months since my last post. Making a move of 1100 miles will do that! Well, the boxes are finally unpacked, the Thanksgiving guests have departed and I can finally get back to blogging!

Now that Congress is back in town, the next few weeks should be interesting as we approach the "fiscal cliff." We could certainly use an adult conversation about what levels of taxation and spending are appropriate. Sadly, we're more likely to get the same heaping portions of spin and baloney we suffered through during the--seemingly endless--campaign.

One of the biggest pieces of baloney is the idea that Social Security has anything remotely to do with the deficit. Let's get this straight right now: Social Security is 100% paid for by the FICA taxes paid by currently working employees and their employers. Not a penny of any other tax revenue goes to paying Social Security benefits!

In fact, the FICA tax structure was adjusted in the 1980's so that Social Security would run a surplus in the period leading up to the retirement of the babyboomers. Imagine! We actually got our national act together and planned ahead.

But, somehow, Social Security has become part of the deficit talks. Some "very serious people" in Washington say that we must reduce benefits, raise the retirement age or both to help address the deficit.

Here's an idea: No matter how many millions of dollars someone makes, they only pay FICA taxes on the first $110,000 of wages. Raise that limit to $250,000 and the entire Social Security "problem" is solved for a period of time longer than anyone alive today will see.

Unfortunately, the Medicare problem is not that easy to solve. Many of us retirees believe--wrongly--that Medicare is a program that we paid for through our Medicare taxes while we were working. Unfortunately, those Medicare taxes--by law--only pay 25% of the cost of Medicare. The rest comes from other taxes.

Medicare's going to be a tough problem to solve because almost no one is willing to address the real problems. First, Medicare is likely to spend more money on you during your last year of life than in all the years leading up to that time. It's hard for those of us who will go on living to recognize that there comes a point at which additional expensive treatment only prolongs suffering.

Second, we're trying to figure out how to pay for the world's most expensive--but not most effective--healthcare system. If every other wealthy nation has figured out how to provide healthcare with better outcomes than ours at half the cost, maybe it's time for the lightbulb to come on over our heads!