A compromise to correct 100% of the long term deficit of SS, include a little tax increase and a little benefit cut and each would make up for around 50% of the deficit (and no private accounts). The Bush plan to cut benefits would resolve about 70% of the problem, if combined with a small increase in the cap on the salary subject to the SS tax we could resolve 100% of the problem.
The way to make this compromise and put less of the burden on the middle class is to remove the mixed bag of price and wage indexing on the middle class (cutting their benefits) and instead have price indexing only for people whose earnings are above the level of the cap on SS taxes and make the level of the cap variable based on wages, so we would adjust the cap to $110,000 or $120,000 now and it would increase slightly over time as wages increase. That way we have a mix of benefit cuts (price indexing for people over the cap) and tax increase (raising the cap) and still the people who rely on social security don’t have their future pulled out from under them, people who pay SS tax on 100% of their income don’t have their benefits cut, and those who do have their benefits grow at a slower rate don’t have their taxes increased. |
