Christie's Proposed Changes To Social Security

New Jersey governor Chris Christie has come up with a few ideas on how'd he would change Social Security.

As much as I'm tempted I won't discuss this along partisan political lines.

Nor repeat, as I have so many times before, my views on SS itself. Instead I will focus purely on his proposal and why I think it's a lousy idea.




(1) Christie proposes raising the full retirement age from 67 to 69 years old.
(a) Considering the problem younger people face finding too few jobs I don't think it's a good idea to discourage older workers from leaving the workforce. This would compound the situation.

(b) Most older workers over 55 are finding it more difficult to get hired as well. Most companies prefer healthier perhaps even better educated younger workers. Many of these oldsters are unskilled and just hanging in there long enough to reach 62. Another part of his plan is to raise that age to 64 before one is eligible for SS.

The bottom line is we'd have not just those looking to retire at 62 being forced to work two more years, but those at the other end waiting for 69 so they can get full benefits. That's 100,000's of jobs that younger workers may not have the opportunity to replace if these older workers were being forced to stay longer.


(2) Cut benefits to those making $80,000+. Cutting them entirely for those $200,000+
(a) For 2015 the maximum SS taxes are capped at $118,500. Total SS taxes amount to 12.4% (half paid by employees/half employers). This translates to $14,694 someone will have to pay into SS if they earn $118,500+. Here's the rub. If someone is doing well for himself and earns $200,000+ they would be no longer eligible to collect under Christie's plan. This amounts to a huge tax increase w/o any of the benefits. Shouldn't these folks then be entitled to all their money back with interest?

(b) Many of those who start collecting before 67 are already getting their benefits cut (including those making $80,000). For 2015 the maximum one can earn before full retirement age is $15,720. Anything above that results in benefits being reduced $1 for every $2 earned over that amount. So say for example someone is earning $80,000. That's $64,280 over the limit. The maximum benefit SS pays in 2015 is $2,663 a month ($31,956 a year) Thus it's conceivable someone earning $80,000 may not receive anything at all even under the present system.

It looks like under Christie plan he would take this a step further. Someone making $80k+ would see their benefits reduced even if they wait until their full age of retirement. Again in this case these payers would have paid the full fare and only receive partial benefits down the line.

(c) No I'm not boo hooing for the wealthy. $80K seems like a lot of income, but 30 or 40 years from now I expect this amount would be what most middle income people will be earning. When I first started out working I earned $5,200 a year. This was enough to raise a child and support my wife who worked part time. These days it takes 6 or 7 times that amount. So therefore it's more then likely someone starting out at $25,000 a year right now could expect to earn well over $100,000 a year by the time they reach retirement age.


Christie's plan would raise Medicare age from 65 to 67 (by 2040)
This along with several other changes to Medicare itself. This would cause the burden to fall on workers and employers to extend their healthcare plans two years longer. If older workers have trouble finding jobs with healthcare benefits this surely isn't going to encourage employers to hire them over younger workers either.


IN CONCLUSION
A lot of this is bracket creep in nature. Many of these dollar amounts which seem innocuous today will affect nearly everyone 30 or 40 years from now. I tend to see this as a backdoor tax if one day people aren't entitled to receive what they were promised after paying into SS over their working life. In other words a sneaky way of doing a tax increase.

Every article I read concerning this matter keeps phrasing their reports to say these "entitlements" are too expensive for the "government". I question that very line of reasoning. First off "the government" is us. Not some money tree people are sponging off. They are called "entitlements" for a reason. Legislation was setup for Social Security entirely separate and apart from the U. S. general budget. People pay into this expecting they will receive what they were promised. It's should not be used as a cash cow via government borrowing from it like they have been since it's inception. That would be a bait and switch.

The other thing that annoys me. NO IT'S NOT A PONZI SCHEME. A Ponzi is where someone gets paid via new investors rather then from profits earned. First off SS was never set up to make profit. Secondly it aligns more closely to that of how insurance companies function. People pay into insurance pooling their money to help pay for others and themselves when (not if) they have a need for it in the future.

I'd be more concerned with government forcing people to pay taxes only to give it away to other nations with citizens getting nothing in return. I'd be more concerned with government handing out other taxpayers money to those who contributed nothing to it's revenue in so many other ways. As long as people stand up against these kind of SS schemes social security will remain strong.

Here Are Some Fixes.
* Raise the earning caps letting even wealthy people remain entitled to what they paid for. Many who may not live long enough to collect like many of us.

* If workers & employers have to pay 12.4% tax on earnings, wouldn't raising wages provide additional revenue?

* Young workers start earning money later and later because of colleges requiring 4 years. Why not compress studies to 3 years or less? Increase incentives for 2 year trade schools, etc.

* Currently 70% of our population didn't graduate college. We need to get them well paying employment (think bad trade deals).

The problem isn't with SS, but rather the lack of will by
certain politicians who'd rather not face the tough political choices.