Thursday, October 16, 2008

Obama advisor: “Ask high earners to pay more into Social Security”

Jason Furman, chief economic advisor to the Obama campaign, writes on Social Security in the DesMoines Register:

Sen. Barack Obama is committed to protecting retirement security, strengthening seniors' health-care coverage and treating all seniors with a respect that dignifies their many contributions to our country.

He understands that the challenges facing Social Security and Medicare are very different. Despite the cries of privatization proponents, Social Security is not in crisis - it has a manageable cash-flow issue that we can ably solve over the upcoming years and decades.

Obama is confident that we can come together to find a workable solution. He believes that one strong option to improve Social Security's long-term solvency is asking people who earn more than $250,000 to pay a little more into the system. But Obama will not raise the retirement age or reduce Social Security benefits.

Even more important, Obama strongly opposes the privatization schemes that George Bush championed; Americans' retirements should not be subject to the whims of the stock market. Social Security is one of the most successful government programs in our nation's history. As president, Obama will keep Social Security strong for future generations.

Ensuring the future solvency of the Medicare trust fund may be our toughest fiscal challenge. Forty-two million Americans currently rely on Medicare, and Obama is fundamentally committed to Medicare's long-term strength. Washington is broken, and it has failed to overcome the special interests and pass health-care reform that expands coverage and lower costs, which would keep Medicare strong and affordable for America's seniors. As president, Obama will reduce costs in the Medicare program by enacting reforms to lower the price of prescription drugs, end the subsidies for private insurers in the Medicare Advantage program and focus resources on prevention and effective chronic-disease management.

Obama will also bring Democrats and Republicans together to provide every single American with affordable, available health care that reduces health-care costs by $2,500 per family. By investing in proven measures to improve the health of all Americans and reduce health-care costs across the economy, we can ensure that the Medicare program remains strong for future generations.

Obama is serious about his commitment to America's seniors: He will protect Social Security, strengthen Medicare and work to make sure Americans are able to enjoy a healthy, secure retirement.

All reasonable stuff, as far as it goes. But one question: If Sen. Obama wants to "ask" high earners to pay more, doesn't that imply they get the option to say "no"? I didn't think so…

Ok, one other question: if Obama wants to apply a new tax to people earning over $250,000 -- which we know will fix at most around 16% of the 75-year deficit -- and if Obama has ruled out raising the retirement age or cutting benefits, what else is left? You guessed it: higher taxes on people earning less than $250,000. Even assuming Obama imposes a 4% tax on all earnings above $250,000 and pays no extra benefits -- a double first for Social Security -- the trust fund would remain solvent only around 3 extra years. The numbers just don't work -- mathematically, Obama can't keep his promise not to cut benefits or raise the retirement age unless he's got another source of tax income. A very big source.

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