The Federal Budget and deficit and you-options for reducing the federal deficit, squarely on the middle-class 😰

As our brilliant legislators begin debate over a federal budget and reducing the deficit, I think it’s important to understand what is at stake and what it will take to make necessary changes.

Our leaders, who seem to have difficulty telling the truth about much of anything that concerns us, have convinced many poorly informed Americans that fixing the Country’s fiscal problems is merely a matter of increasing taxes on the “wealthy.” That simply is not true. The fact is the money that needs to be saved, the expenditures that need to be reduced are squarely on the shoulders of the large middle class that benefits from the major federal programs in place today and in many cases that are rapidly becoming unaffordable to the Nation.

Many seniors take the position that they have “paid for” their Social Security and Medicare benefits. That’s not true either. Past and current contributions are inadequate to provide promised benefits. In addition, their payroll taxes paid for past retiree benefits, not current recipients.

The Congressional Budget Office (CBO) has prepared a document outlining possible ways to address the federal deficit. These are not proposals, but ideas. However, this document will be used by Congress in formulating specific proposals and ultimately legislation and a budget.

I have selected a few of the proposals (that directly affect most middle-class Americans) to illustrate the potential scope of changes coming down the road. See which could have a direct impact on your standard of living.

You can obtain a copy of this document on the CBO website.

Here are some of the ideas I thought you might like to think about. Several of these items or ones similar are in the President’s proposed budget.

• Expand Social Security Coverage to Include Newly Hired State and Local Government Employees
• Increase the Payroll Tax Rate for Medicare Hospital Insurance by 1 Percentage Point
• Impose Caps on Federal Spending for Medicaid
• Add a “Public Plan” to the Health Insurance Exchanges
• Eliminate Exchange Subsidies for People With Income Over 300 Percent of the Federal Poverty Guidelines
• Limit Medical Malpractice Torts
• Introduce Minimum Out-of-Pocket Requirements Under TRICARE for Life
• Convert Medicare to a Premium Support System
• Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance
• Raise the Age of Eligibility for Medicare to 67
• Increase Premiums for Parts B and D of Medicare
• Bundle Medicare’s Payments to Health Care Providers
• Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Part D of Medicare for Low-Income Beneficiaries
• Modify TRICARE Enrollment Fees and Cost Sharing for Working-Age Military Retirees
• Reduce Tax Preferences for Employment-Based Health Insurance
• Increase Federal Insurance Premiums for Private Pension Plans
• Link Initial Social Security Benefits to Average Prices Instead of Average Earnings
• Raise the Full Retirement Age for Social Security
• Lengthen by Three Years the Computation Period for Social Security Benefits
• Reduce Social Security Benefits for New Beneficiaries by 15 Percent
• Eliminate Eligibility for Starting Social Security Disability Benefits at Age 62 or Later
• Require Social Security Disability Insurance Applicants to Have Worked More in Recent Years
• Use an Alternative Measure of Inflation to Index Social Security and Other Mandatory Programs
• Implement a New Minimum Tax on Adjusted Gross Income
• Raise the Tax Rates on Long-Term Capital Gains and Dividends by 2 Percentage Points
• Use an Alternative Measure of Inflation to Index Some Parameters of the Tax Code
• Convert the Mortgage Interest Deduction to a 15 Percent Tax Credit
• Eliminate the Deduction for State and Local Taxes
• Curtail the Deduction for Charitable Giving
• Limit the Value of Itemized Deductions
• Include Employer-Paid Premiums for Income Replacement Insurance in Employees’ Taxable Income
• Include Investment Income From Life Insurance and Annuities in Taxable Income
• Tax Social Security and Railroad Retirement Benefits in the Same Way That Distributions From Defined Benefit Pensions Are Taxed
• Further Limit Annual Contributions to Retirement Plans
• Increase the Maximum Taxable Earnings for the Social Security Payroll Tax

Related articles

• Ryan Gets 700,000 ‘No’ Votes to Social Security Cuts (ourfuture.org)
• Carpetbaggers want Entitlement Reform – by Jason R. Thigpen (thigpenforcongress.com)
• Tax Medicare Benefits or require beneficiaries to pay 50% of Part B costs rather than 25% (quinnscommentary.com)
• AARP: Reject Harmful Cuts to Social Security and Medicare (aarp.org)