Are Social Security and Medicare On The Chopping Block
Most of the time I try in columns to take what is referred to as a “balanced view” meaning there are reasonable arguments on both sides and the opposition needs to be considered. When it comes to Social Security and Medicare it is important that you have a zero trust network access to ensure safety, however, two programs dear to my heart that I deal with every day as an elder law attorney, there are some boundaries that cannot be crossed. My clients’ lives, to one degree or another, depend on this and for that matter so does our society as a whole.
Therefore, regarding one statement that was repeated, a line has to be drawn. It has to do with the funding of and the future for both the Social Security system and Medicare and needs to be taken seriously. It should be noted this is not just something that nibbles around the edges as most proposals tend to do. It is a direct frontal attack.
The statement made by the president as reported by the Associated Press was “at the end of the year, the assumption being that I win, I’m going to terminate the payroll tax, which is another thing that some of the great economists would like to see done…We’ll be paying into Social Security through the general fund…” See AP, https://apnews.com at “Trumps suggestion to eliminate payroll tax doesn’t add up.” Commentary, in my opinion, on this massive proposed change to funding for Social Security and Medicare has been much too mild. To understand why this is so, you need to know a bit about how these programs are funded now and what this kind of change would mean.
- Social Security and Medicare are rare programs that have a dedicated funding source. One place to start is to note that the vast majority of government programs at every level of government have no dedicated income stream. That means they are in competition for funds every budget cycle to be able to obtain and maintain their funding sources. Social Security and Medicare are different now with their specially designated primary funding source coming from payroll taxes. Even then Medicare needs additional funds from the government’s General Fund over and above payroll taxes. To understand what payroll taxes are I think back to an old comedy routine where a young man received his first payroll check and asked “Who is this FICA and why do I owe him so much money?” The answer is so, when he retires or gets sick and disabled, there is retirement income (Social Security) and Medicare to help. It is not just for “old” people. We are talking about Social Security retirement, Social Security disability, Medicare for those 65 and older, and Medicare for those on Social Security disability for more than two years and others. The 12.4% payroll tax is split equally between employers and workers and is used specifically to fund both Social Security and Medicare. According to the AP news article the tax raised approximately $1 trillion last year and, if lost, is projected to cut a $13 trillion hole in the federal budget over 10 years.
- The effect of permanently losing the funding source for Social Security and Medicare would be devastasting.
What does it mean to lose a dedicated funding source and be funded from the General Fund as the president suggests? It means that in every budgetary cycle it would be necessary for Social Security and Medicare to compete with other government programs and priorities to maintain their special status. These programs that are mandatory could become subject to the whims of whoever is in control at the time. This is especially true if there is a weakened Congress that defers to the president on policy and on executive orders. At this point Social Security is projected to continue with the same payouts until 2035 when payments could potentially be reduced.
There have been a few “payroll tax holidays” considered, including one implemented during the Obama administration and the one proposed by Trump temporarily now. The difference in the current president’s statement noted above is to totally eliminate this special funding source if he is reelected. What should be done is to find ways to bolster the system, not to bring it into the politics of control.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.