NCPA - National Center for Policy Analysis


January 25, 2005

Some members of Congress want changes to Social Security to be a part of a broader reform initiative that would also tackle runaway Medicare benefits and the payroll tax, report Joel Havemann and Richard Simon of the Los Angeles Times.

At the heart of the movement is Bill Thomas (R-Calif.), chairman of the House Ways and Means Committee. Although he acknowledges that Democrats may be reluctant to agree to any wide-reaching proposals, Thomas suggests taking a piecemeal approach to resolving the nation's painful fiscal problems would be a mistake:

  • Social Security, which will be paying out more in benefits than it receives in revenues by 2018, will become increasingly expensive to fix the longer change is delayed.
  • Medicare's costs are growing much faster than those of Social Security; already the government is paying out more in Medicare hospital insurance costs than it receives in revenues.
  • The 12.4 percent payroll tax discourages hiring because, in reality, employers and employees do not share the tax burden -- the entire tax comes directly out of what workers would otherwise be paid.

Thomas says that by considering revisions to Medicare at the same time, savings for long-term care would be more coherent if they accompanied general retirement savings.

He adds that Congress should consider whether men and women should get equal Social Security benefits and whether to adjust the age at which workers can retire with partial or full retirement benefits.

Source: Joel Havemann and Richard Simon, "Social Security Investments Called a Start," Los Angeles Times, January 19, 2005.


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