Why US should not pay Warren Buffett's Social Security and Medicare
Means testing is the missing element in ongoing debt talks. Reducing Social Security and Medicare benefits for higher-income retirees would enable the US to continue funding these programs. Politicians must have a discussion on where to draw the line.
University Park, Pa.
Both sides of the political spectrum recognize the severity of our yearly federal budget deficits and the growing outstanding federal debt. However, the recent proposals for addressing the debt issue do not effectively tackle the long-term problem with the funding of Social Security and Medicare.
In his July 15 news conference on the debt issue, President Obama indicated that in an effort to address the long-term problems with Medicare (and presumably Social Security), he would be willing to consider “means testing” these programs, that is, reducing the benefits for retirees with high incomes.
In my May article “The Missing Ingredient in the Budget Debate: Phasing Out Social Security and Medicare for High Income Retirees” (Social Science Research Network, Economic Growth eJournal), I set out a means testing proposal for both Social Security and Medicare.
In the article, I argue that as a tool for limiting the costs of these programs and thereby helping to put them on a sustainable basis without reducing the effectiveness of their “safety net” function, Congress should phase-out the benefits under these programs for high-income retirees.
Two phase-out proposals
Specifically, I set out the following phase-out proposals:
- The Social Security benefit should be phased out incrementally as individuals move from $75,000 of annual retirement income to $175,000.
- To participate in Medicare, retired persons should be required to pay an increasing portion of the premium covering the costs of Medicare benefits as they move from $75,000 of annual retirement income to $175,000.
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