Just about every politician believes we need to tackle "entitlements" to reduce the debt.
The solutions boil down to this: "Citizens, we propose that while holding your (Social Security and Medicare) deductions constant, we promise that you will receive less money when you retire, and you will have smaller health benefits."
No sane person would accept that proposition. Reducing Federal Insurance Contributions Act (FICA) deductions will consequently decrease government revenue and not reduce the deficit. The only reasonable way to solve Social Security and Medicare is to decouple them from the operating budget, then increase or remove the cap on the contribution level on FICA. Employer contributions need not be raised. Finally, force those individuals who want to retire early to pay more into the system via higher FICA rates. Medicaid costs will go down under the Affordable Care Act because the poor will seek preventive care.
For the budget, institute a progressive flat tax, with fewer brackets and considerably lower marginal rates. It needs to be progressive because the poor pay a higher percentage of their income on necessities. It would be a flat tax, so no deductions -- including home mortgage and property tax -- would be allowed. Corporations would pay a minimum 25 percent tax rate. To control spending, total tax revenue (excluding FICA) would be held to 20 percent of GDP; this could be increased only during economic downturns and national emergencies. Any increase would be time-limited. Discretionary spending would be held in check by this 20 percent target.
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Peter C. Rosato
Hilton Head Island