Jan. 16 (Bloomberg) -- The Business Roundtable, which represents chief executives of major U.S. companies, proposed shoring up Social Security and Medicare by raising the eligibility age without increasing taxes on income subject to the Social Security payroll tax.
For Social Security, the group’s plan released today in Washington would gradually raise the retirement age to 70 from 67, scale back benefits for wealthier recipients and switch to a method of calculating inflation that would result in lower cost-of-living payments for current and future retirees.
“We have tried to gather three or four very pragmatic, despite their political firepower, relatively straightforward proposals that do the trick,” said Gary Loveman, chief executive and president of Caesars Entertainment Corp., chairman of the group’s health and retirement committee.
“This proposal dovetails very nicely with the demographic realities of the workforce,” said Randall Stephenson, chairman and chief executive of AT&T Inc. “We are going to need our employees to work longer just to fill the needs that we have in the work force.”
The group also offered a plan for the Medicare health program for the elderly that would raise the eligibility age to 70 and create a system of private plans to compete with the government-sponsored program. The proposal is similar to that proposed by House Republicans as part of their budget and was rejected by the Democrat-run Senate.
The business group proposed expanding means testing in Medicare, or reducing benefits for upper-income recipients.
In rejecting new tax revenue as part of the plan, Loveman said the income base on which Americans pay Social Security payroll tax would have to increase “very substantially to draw a sufficient level of revenue to address the long-term solvency of the program.” That “would be far more damaging to economic growth than what we’re asking people to consider,” he said.
The plan comes as Congress prepares for another round of battles over fiscal issues, this time raising the nation’s borrowing limit and heading off automatic spending cuts it delayed until the end of February.
Business groups including the roundtable are calling for Congress to address the shortfall in funding for Social Security and Medicare as part of any debt-reduction plan.
Still, neither political party has shown signs it would make the political tradeoffs to advance entitlement changes through the Republican-led House and the Democratic-controlled Senate.
The group’s proposal to switch Medicare to a system of private plans that compete with the government program may be particularly unworkable in the current congressional climate.
“This has been almost dogma that: ‘we don’t want to do this,’” said John Engler, a former Michigan governor and president of the Business Roundtable. “It is a discussion that’s very important to have. It wasn’t that many years ago that choice in education was unthinkable.”
Today Medicare, Medicaid and Social Security account for 42 percent of the federal budget. By 2020, they are estimated to account for half.
The Business Roundtable has long opposed efforts to reduce the budget deficit by raising business taxes, maintaining that such an approach would make U.S. companies less competitive globally.
-- Editors: Jodi Schneider, Robin Meszoly
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