A few days ago, the WSJ published yet another idiotic editorial arguing that Medicare and Social Security must be cut or..., well something. They have pretty much everything wrong. For example, he points out how since 2010, Social Security has been underfunded. Well, yes, that's true, the "Deal" that Obama cut with the Rs cut the FICA tax rate from 6.2% to 4.2%, which ended at the start of 2013. This is, by far, the most stimulative tax cut of all the many tax cuts the republicans have pushed for since the collapse of 2008, because it's one of the few that mainly affects people who will actually spend it. It pales in comparison to what simply spending the lost revenue on hiring would have...but instead they answered with the sequester, which cuts tens of thousands of government and other employees, overcoming the tiny gains from the tax cut.
The biggest error though is when they point out that, extrapolating the 2011/2 numbers out to 2030, that the average medicare and social security recipient will have paid into the system $180K and will be taking out $664K of benefits. Even were that correct (17 years of 6.2% FICA payments were counted as 4.2%), it's mostly irrelevant. For starters, the employer matches that amount. It's really part of the employee's compensation, but nobody pays taxes on it. That $180K suddenly becomes $360K. Secondly, there are at any time, slightly more than twice as many people contributing as collecting: if you work from 18 to 65, that's 47 years, while the average lifespan after 65 is less than 20. So the number of people contributing is twice that of people collecting. Well not quite--lots of people don't work the full 47. There were 139M people who filed taxes last year and 49M beneficiaries. So what had seemed like a 3.7:1 ratio is in fact, pretty close to 1:1.
Social Security insists that their numbers work out. From what I've seen, they are significantly better at math than these guys, or anybody that believes them.
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