and I’m definitely not a push-over. But I am a voter.”
What exactly does the word “earn” mean? Dictionary.com offers the following:
First, Medicare. Andrew Biggs crunched the numbers.
Let’s start with a typical person who was born in 1944, began work at age 21 in 1965, and in 2009 retired at age 65 and enrolled in Medicare. Over the course of his life he paid the Medicare tax out of his wages.
After adjusting for changes in tax rates, cost of living adjustments, interest rates, etc.:
This typical person paid around $64,971 in Medicare payroll taxes over his lifetime. Likewise, after netting out Medicare premiums, he’ll receive around $173,886 in lifetime Medicare benefits. The net? He can expect to receive around $108,915 more in benefits than he paid in taxes over his lifetime. (Emphasis mine.)
Second, Social Security. In 2001, the Cato Institute called social security the “boomers’ bargain” due to the low tax rates they paid during most of their working years.
Ever since we Gen-X/Yers began working, we’ve paid 12.4 percent of our earnings to Social Security — half taken through the “FICA” tax on our paycheck and half through the payroll tax. In the coming years, Congress likely will increase that rate to more than 17 percent to delay the 2038 catastrophe. [Bankruptcy of the Social Security trust fund.] What is more, the Medicare tax (which is now a mere 2.9 percent) will increase because that program faces an even worse crisis than Social Security.
In contrast, the Boomers will get a bargain. When they entered the workforce in the late 1960s, they paid only 6.5 percent of their earnings to Social Security and nothing to Medicare. For about half of their working years, the Boomers paid 10 percent or less to Social Security and less than 1.25 percent to Medicare. Only from 1990 on, when the Boomers had earned paychecks for a quarter-century, did they start paying 12.4 percent to Social Security and 2.9 percent to Medicare — the same percentage we Gen-X/Yers have paid our whole lives.
It’s worth noting that in 2001 the social security trust fun was expected to start running deficits in 2016. It ran its first deficit last year. In their 2011 Summary Reports, the Social Security and Medicare Boards of Trustees concluded:
Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided.
The financial challenges facing Social Security and Medicare should be addressed soon. If action is taken sooner rather than later, more options and more time will be available to phase in changes so that those affected can adequately prepare.
The problem is that seniors – most perfectly capable of working more and consuming less – vote. Thus, they’ve earned the benefits. The rest of us will have to pay.