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Dear Savvy Senior
Where do the presidential candidates stand on Social Security and Medicare? I’ll be eligible for these programs in a few years and haven’t been able to find anything on their positions.
You would think that Social Security and Medicare, the government’s huge entitlement programs that affect the pocketbooks of nearly every single voting American – either in taxes paid or benefits received – would get significant attention on the campaign trail. But that’s not the case this year.
Presidential candidates Arizona Sen. John McCain and Illinois Sen. Barack Obama have devoted little time this election season talking about Social Security and Medicare. That may be because both programs (especially Medicare) are in dire need of reform, and the solutions aren’t likely to make voters particularly happy. Here are the problems that exist and where the candidates stand.
Social Security is facing a long-term funding problem. By the year 2017, Social Security will start taking in less in tax revenue than it has promised to pay out in benefits. That’s because the massive baby boomer population will be retiring in droves. And by 2041, the system will only be able to pay out 78 percent of promised benefits. To fix this financial shortfall experts have recommended a variety of solutions including:
· Raising taxes: Social Security trustees estimate that Social Security could be made solvent for the next 75 years by increasing workers payroll (FICA) tax to 14.1 percent. It’s currently 12.4 percent, split between workers and their employers, up to a wage cap of $102,000 in 2008. The cap rises every year with inflation. Earnings above that aren’t taxed for Social Security.
· Curbing benefits: This could be done by lowering annual cost-of-living adjustments, or by raising the retirement age (currently set to rise to 67 by 2027) to 70.
· Creating private accounts: This is what President Bush rolled out in 2005 but it didn’t take hold. It gives workers the option of diverting part of their Social Security taxes into private accounts to invest in stocks, bonds, and/or mutual funds. However, critics argue that privatizing Social Security does little to address the long-term funding concerns.
Here are the candidate’s positions.
Obama strongly opposes individual private accounts and is against curbing benefits or raising the retirement age. He believes one way to help shore up Social Security is to implement a payroll tax of 2 to 4 percent on workers earning over $250,000 a year – starting in 2019. Half of it would be paid for by employees and half by their employers.
McCain believes the best way to fix Social Security is by curbing or slowing the growth of benefits rather than raising taxes. He has also indicated he could embrace an increase in the retirement age, and supports optional and voluntary private accounts as a way to supplement Social Security.
Due to skyrocketing health care costs, people living longer and 78 million baby boomers – who will start becoming eligible in just two years – Medicare faces much greater financial problems than Social Security and is much more difficult to fix.
Experts suggest, and both candidates agree, that fixing Medicare has to be part of an overall change to the entire health care system. Here’s what else they offer on the topic.
McCain has proposed a major overhaul of Medicare’s payment system, paying health care providers not by each individual service they perform but by how successfully they treat their patients. He also has proposed making wealthier Medicare beneficiaries pay more for their benefits, starting with the Part D prescription drug benefit.
Obama on the other hand wants to improve efficiency and reduce waste in the Medicare system, including eliminating subsidies to the private insurance Medicare Advantage program. He also wants to help bring down the price of drugs under the (Part D) prescription drug benefit by allowing Medicare to negotiate with drug companies for better drug prices like the VA does. He would also like to expand Medicare, in a sense, making a Medicare-like program available to those under age 65 who don’t have insurance.
Savvy Tip: To learn more about the candidate’s positions visit www.barackobama.com and www.johnmccain.com.
Send your senior questions to: Savvy Senior, P.O. Box 5443, Norman, OK 73070, or visit www.savvysenior.org. Jim Miller is a contributor to the NBC Today show and author of “The Savvy Senior” book.
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