A lot of conservatives/Trump voters are confused as to why Liberals are saying that the tax bill Congress passed today will be bad for entitlement programs like Social Security and Medicare. Below is a brief explanation as to why, but first let’s stop calling them “entitlements” because they aren’t. It’s not like welfare, which you are “entitled to” if you meet certain criteria and into which you don’t have to contribute. Call Social Security “deferred payments” or a “pension”. For that matter call Medicare “pre-payed health insurance”. But they’re not entitlements because you paid into them! Okay, got that off my chest.
Social Security has always been a “partially reserved” fund. In other words, like many pension funds, it was never “fully funded” 100%. Simply put, every penny we have put in isn’t there for a lot of very complicated reasons I won’t get into here (see Note 1). For the most part how much the fund contains at any given point depends on how well the economy has been doing and each generation pretty much pays for the next generation. That’s why we hear stories like “Social Security only funded until 2034”. That year could be later if the economy has a good run or it could come sooner if we have another recession/depression. Medicare works similarly.
Since the health of those two “deferred payment” programs depends on the economy and the Deficit (see Note 2 at bottom) is one of the leading indicators and factors that affects the health of the economy, any increase in the Deficit forces the US to borrow more, which in turn increases our Debt. The Tax Bill passed today (see Note 3) will decrease Revenue and Congress has not offset that decrease in Revenue by reducing how much we spend. So the GOP, who used to accuse the Democratic party as being “Tax and Spend Liberals” has now officially become the party of “Taxes for Thee but not for Me and My Wealthy Friends”–a tried and true method to destroying any economy.
In the past one of the most important ways the GOP has tried to bring the deficit down is to make changes to Social Security and Medicare. They can try to push back the age at which we can start receiving Social Security–this is called “full retirement age” (see Note 4). The GOP will say they can save millions by just pushing back that age for you and I and it is true, it will save money. But it will make our lives infinitely harder. Maybe I won’t be able to continue working when I’m 67. Last I heard they are talking about pushing it back to 70. My grandparents died at 75. What if I pass away then? That means I’ve been working since I was 14 and contributing to Social Security all those years and if I’m lucky I might get 5 years of benefits out of it. That’s nuts and patently unfair.
Not only can they do that, they can change the formula for how much you can receive if you remain employed. For now, if you try to get Social Security early, you can only collect a certain amount. For example in 2015 your benefits would have been temporarily reduced by $1 for every $2 you earned above $15,720. This “earning limit” gets changed every year. So the GOP could say that your benefit is reduced by $1.50 for every $2 or say that the earning limit doesn’t increase (and therefore won’t help you keep up with Cost of Living Increases).
In regards to Medicare, they could start “means-testing” (again this is a GOP proposal that’s been around for a while). This would mean the government would check to see how much you make and say that anyone making above a certain level must pay a greater percentage of Medicare costs. On the surface this sounds fair. But the fairness of it depends on what that “income level” is determined to be. For example, the 2015 poverty threshold for a single individual was $12,082 / year. Can you imagine living on that? If you make more than that, the government doesn’t consider you poor. The same principle will be applied to Medicare means-testing. The GOP will push for a very low “means” and the already struggling Middle Class will be hit very hard. If the Middle Class is dependent upon Social Security for retirement (and we have a good idea that they are, see Note 5 ) and the GOP plans on reducing those benefits along with Medicare benefits, then there is going to be a lot of elderly people really struggling. In fact, an elderly care crisis has already begun. The timing of this deficit increase, in order to give the wealthy more tax breaks, could not have been worse for the average American.
To sum it up, there are lots of ways that the GOP can affect these two programs that will hurt not only the Poor but the Middle Class, and they’ve been making noises for years that they can’t wait to get their grubby hands on them (Speaker Ryan has said he’s been dreaming of cutting them since college). By passing this tax bill they have essentially created a budgetary crisis for which they will now claim is the reason why they have to change the rules for these two programs. Anyone who voted for Trump and is happy about this Tax Bill better enjoy the pennies they get back in April because they’re not going to be happy further down the road when they have to resort to eating cat food. Unfortunately it won’t be just Trump voters who will be eating kitty kibble–we all will.
NOTES:
- http://www.pewresearch.org/fact-tank/2015/08/18/5-facts-about-social-security/ Just Google history of social security and you can drown in the details if you so desire
- Do NOT conflate Debt and Deficit. They are NOT the same thing. In simple terms, a budget deficit is the difference between what the federal government spends (called outlays) and what it takes in (called revenue or receipts). The national debt, also known as the public debt, is the result of the federal government borrowing money to cover years and years of budget deficits.
- “The plan would permanently drop the corporate tax from 35 percent to 21 percent, while also rewriting the individual tax rules to lower rates and restructure deductions. The plan would cut taxes in 2018 for the vast majority of households, with by far the largest benefits going to the wealthy. Many of the tax breaks are set to expire at the end of 2025, leaving a large section of the middle class to pay more in taxes. But Republicans promise a future Congress will intervene to prevent that tax hike from happening.” from the https://www.washingtonpost.com/business/economy/gop-tax-bill-passes-congress-as-trump-prepares-to-sign-it-into-law/2017/12/20/0ba2fd98-e597-11e7-9ec2-518810e7d44d_story.html?utm_term=.7cfa59492113
- I was born in 1970 so right now that means I can’t start collecting until I’m 67 years old. Follow the link to find out what your full retirement age is. https://www.thebalance.com/when-can-i-start-receiving-social-security-benefits-2894602
- https://www.forbes.com/sites/patrickwwatson/2017/10/12/boomers-are-not-saving-enough-for-retirement-neither-is-the-government/#5624b5d81a4d
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