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Home Publications Blogs Social Security Monitor Letter to Mitt Romney on Social Security Comments

Letter to Mitt Romney on Social Security Comments

Written by Dean Baker   
Thursday, 11 August 2011 15:25

Governor Mitt Romney
Mitt Romney for President
585 Commercial St
Boston, MA 02109

Dear Governor Romney:

While campaigning at the Iowa State Fair, you were asked by a member of the crowd if you support raising the cap on payroll taxes, so that the rich pay more into the system. You responded by saying "…When it comes to Social Security, Medicare, and Medicaid, the truth is that we need to make sure we can keep the promises we're making to 20 and 30 year olds. You may say we should just raise everyone's taxes. Do you know what the tax rate would have to be if we wanted to keep the promises we made? Right now those programs take a payroll tax out of earnings of 15.3 percent. That would have to rise to 44 percent. We're not going to do that."

Actually, according to the Congressional Budget Office, there is no need for an increase in Social Security taxes through 2038, a full 17 years after the last date you could possibly be in the White House. In 2050, when today's 20 and 30 year olds will be in or near retirement, the combined Social Security and Medicare tax rate would be 17.3; in 2085, the tax rate would be 22.5 percent, assuming that no changes are ever made in these programs and their costs follow the trustees' projections.

Neither of these rates approaches the 44 percent you mentioned at the State Fair. The necessary tax rate would be even less if the Social Security tax cap was set at 90 percent of wage income as suggested by the Greenspan Commission in 1983.

As a candidate for President of the United States whose decisions could have a tremendous impact on vital programs like Social Security and Medicare, I hope that you will be careful to present the facts more carefully in the future. If you would like any additional background on the program, I would be happy to assist you.

Best Regards,

Dean Baker

Dean Baker
Center for Economic and Policy Research

Comments (2)Add Comment
The somewhat weird analysis that Romney used:
written by AndrewDover, August 12, 2011 8:49

"The total resources needed to close the projected funding gap in the two parts of Medicare greatly exceed those projected for Social Security. This can be illustrated by showing the total cost of both programs as a percentage of taxable payroll. The SMI program is not currently funded with a payroll tax, and while Congress could choose other means to finance the portion to be derived from the general fund, if both the HI shortfall and the general fund portion of SMI were to be financed by a payroll tax hike, the tax rate for Medicare would have to rise from 2.9 percent today (1.45 percent on employee and employer each) to 15 percent in 2040 and 25 percent in 2075."

"If added to the rates needed for Social Security, the implied payroll tax rate necessary to cover the future costs of both Social Security and Medicare would be 32 percent in 2040 and 44 percent in 2075."

what Warren Buffett said
written by MB, August 15, 2011 6:10
Just read Warren Buffett's NYT's op/ed and I'm not sure how to read this:

"Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here."

Is he referring to the costs of health care? Or is he advocating reductions in SS benefit checks? Does he object to the formula used for cost of living increases? Or did he mean something else altogether?

Not that you don't already have enough to do. And not as though you're an econ dj taking requests. But if you were going to parse out his op-ed, just wanted to mention that one seems like an ambiguous detail that maybe might be worthy of explication. Otherwise, wow. Shouldn't be surprised but, wow.

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