Tuesday, June 20, 2006

Sylvia Smith on Socail Security and Medicare

Sylvia Smith had a good piece on the financial problems of Social Security and Medicare. She wrote an article about congress being unable or unwilling to tackle these huge problems. She reports that it is down hill after 2011. In 2002 when I proposed repealing the Social Security Act Sylvia was out raged. She ridicules my social security plan.

Here is what will happen under current law to the Social Security Old Age program. When the balance in the SS-OASI trust fund falls below 20% of that years projected expenses, across the board cuts are made to maintain the trust fund at a minimum of 20%. In other words, the federal statute passed in 1984 to safe guard that there would be funds to pay benefits will be there even though only partial benefits will be paid. In Flemming v. Nestor the courts ruled Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress."

This means some time in the mid 2030’s COLA’s will cease. Starting in 2041 actual benefits will be cut.

For Medicare it is a bit sooner. By law Medicare expenses are capped. 50% of all expenses are to be paid by workers payroll taxes. 25% by beneficiaries in the form of premiums, co-pays and deductibles. 25% is to be paid using general revenues. The automatic break will be wages. The maximum amount of expenses can never exceed the equivalent of 5.8% of payroll of which 2.9% payroll tax is paid by the worker. Equivalent of 1.45% of wages paid by beneficiaries and the equivalent 1.45% of wages contributed from general revenues. When the trust fund is exhausted then by law Medicare will have to stop paying for coverage when the total cost exceeds 5.8% of wages. This will occur about 2018.

I am just amazed that she can write this type of article yet since 2002, she has ridiculed my constant attention to the problems facing social security and Medicare in my previous three campaigns for Indiana's 3rd U.S. District Representative seat. I hope she continues to write on these two very large problems.

For those who are interested in a short historical percpective on Social Security that many may not know, I invite you to read Social Security: What Went Wrong?

What was initially promised in terms of benefits and taxes? Who was covered? When were the first sings of a problem identified? What changes have taken place since 1937?

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