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Tuesday, July 08, 2008
Ed Feulner :: Townhall.com Columnist
Social Security: Finding Fixes for the Flood
by Ed Feulner
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A torrent often begins with a trickle -- and so it is with entitlement spending. The flood of retirees that could overwhelm Social Security, Medicare and Medicaid has started slowly, but it’s underway.

Last October Kathleen Casey-Kirschling, a 61-year-old teacher born in 1946 (supposedly the first baby-boomer born), became the first baby-boomer to file for Social Security benefits.

Her filing generated media attention. She completed the process at the National Press Club, then told reporters she looked forward to her benefits. “I’m thrilled to think that after all these years that I’m getting paid back the money that I put in,” she said.

Plenty of people have retired since Casey-Kirschling’s 15 minutes in the spotlight. And plenty more will retire today, next week and next year. Some 10,000 Americans each day will become eligible for Social Security benefits over the next 20 years. The only question is: How our government will pay for this?

Let’s start with what we can’t afford to d raise taxes or run up debt to cover the shortfall.

Recently Rep. Paul Ryan, a Republican budget-hawk from Wisconsin, asked the Congressional Budget Office to determine how much Washington would need to increase marginal tax rates to pay for entitlement spending over the coming decades. The answer was sobering.

The CBO says marginal tax rates for every bracket -- along with corporate tax rates -- would have to more than double. Doing so, the CBO determined, “would significantly reduce economic activity and create serious problems with tax avoidance and tax evasion.” Simply put, the CBO warned, such rates “would probably not be economically feasible.”

If our government tries to borrow money to pay for entitlements, the CBO says, we’ll run up unsustainable debt by 2050. In short, we’d destroy our nation’s economy. Income would stop growing and, by the late 2040s, actually start to contract.

We can’t let that happen. To preserve Social Security and our economy, we need a three-pronged approach.

First, it’s time to start raising the retirement age. Continued...
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About The Author
Dr. Edwin Feulner is president of The Heritage Foundation, a Townhall.com Gold Partner, and co-author of Getting America Right: The True Conservative Values Our Nation Needs Today .
 
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Reply # 1
Date: Jul 13, 2008 - 6:13 PM EST
Subject: Too few children? Yes, but why?
One of the reasons people had large families in the past was to ensure that when they aged there would be a family to support them. Now, with the government having taken over that role, that incentive is missing. Ironically, while in the past a large family made economic sense because children supported their own parents, one's children now end up supporting everyone else; a large family benefits other people and because of the huge payroll taxes one's children don't have excess money to support parents. From an individual's perspective, having no children and living off other peoples' children is economically appealing. Why incur the huge cost of having and raising children if the economic benefits of doing so accrue to strangers?
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Reply # 2
Date: Jul 11, 2008 - 1:07 AM EST
Kill the death tax to fund SS
Remedies for the Social Security and Medicare/Medicaid shortfalls cannot involve any policies that reduce GNP, because regardless of the tax rate, historical data since 1950 show that government will actually collect no more than about 19.5% of GDP.

In 2005, the top 1 percent of tax returns earned 21.2 percent of adjusted gross income and paid 39.4 percent of the nation's federal individual income taxes. If the number paying what the top 1% pay could be increased, the shortfalls would be remedied.

The permanent demise of the death tax will do just that:

First, abolition would tend to lessen the conversion of tax producing assets into permanently nontaxable assets via gifts to nontaxable entities such as charities, churches, endowments, foundations, and the like. Thus the store of taxable assets will grow rather than diminish.

Second, making money will be rewarded in old age rather than punished. So there will be a lot more very able rich people hard at work well into advanced old age investing and accumulating income and wealth for further investment, job creation, and GDP growth, and thus the tax take.

Third, family businesses will continue to expand year after year, undiminished and unpunished by the death tax, multiplying the tax take, just like corporations and tax-free entities who, somehow, now are favored over real people: families.

The growth in the number who pay maximum taxes, as well as those who pay more taxes, will grow exponentially, easily covering the shortfalls.
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