Monday, September 6, 2010

Healthcare and Social Security items

Merrill Goozner points out in his health blog Gooznews, that employer contributions to healthcare premiums is, basically, an independent variable, which fluctuates not necessarily with actual premium costs -- as asserted by proponents of the "Cadillac Tax" on healthcare plans -- but with the amount of power held by employers. Actual healthcare costs have risen about 3% this year, while out-of-pocket premiums rose 14%; meanwhile, employer contributions have remained basically level. The reason: In times of unemployment and very low union membership, workers have little clout; thus, employers are free not only to pass along increases, but to up their workers' share. Goozner describes this as, basically, a hidden tax and drag on family income -- hence a drag on the economy as a whole.

Earlier this month I wrote in a blog that using the argument of increased life expectancy as a reason to up the age of Social Security retirement was misleading since this increase was mostly due to decreased child-mortality rates. In a recent column in the Washington Post by Ezra Klein: "Making Social Security less generous isn't the answer." Klein's argues further that the gain in real life expectancy taking child-mortality into account is, in addition, uneven through the economic classes. Since 1972 the increase for higher-income people (above the median) has been about 6 years, while the increase for lower-income people has only been about 2 years. Thus, raising the retirement age results, statistically, in a greater payout to the first group. Of course, one may argue that wealthier people pay more into the system (because SS payments are a percentage of income); on the other hand, they have more disposable income, and their tax cuts out these days at income above $106,800). Most if not all of the shortfall in the SS system can be solved either by eliminating this cutoff; in fact, a government report stated:

"Making all earnings covered by Social Security subject to the payroll tax beginning in 2002, but retaining the current law limit for benefit computations (in effect removing the link between earnings and benefits at higher earnings levels), would eliminate the deficit. If benefits were to be paid on the additional earnings, 88 percent of the deficit would be eliminated."
(Social Security Advisory Board (July 2001), "Why Action Should be Taken Soon" ) .

Social Security could also be made solvent for another 3 generations by rescinding the Bush tax cuts for those earning more than $250,000 (see Klein's brief piece on the latter at: Fixing SS.)

I'm passing along these links in case you need ammunition to argue SS issues.

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