My Social Security hate plan

WE KNOW that Social Security - the granddaddy government program - is in a hole and that the hole is developing Grand Canyon dimensions. Right now, Social Security spends more than it receives, and Grandpa will be dead-broke in 2033.

When I last wrote about this in 2010, bankruptcy was projected for 2037, so things are getting worse.

I have a simple solution: Remove the cap.

The cap? The basics: Every eligible worker (that's nearly everybody) pays 6.2 percent of each paycheck into Social Security. The employer pays a matching 6.2 percent.

However, Social Security is deducted only from the first $113,700 earned, and zero after that. Deductions are capped at $113,700 this year.

The result? People (like me and you) who earn less than $113,700 pay 6.2 percent every week for 52 weeks, but those who make $1 million are taxed for only about five weeks. Those who earn more might be done in one week. Just 6.6 percent of Americans earn more than $100,000, according to the Census Bureau.

To unleash a torrent of new cash to revive Grandpa, remove the cap and make everyone pay on every paycheck. That's what we do to fund Medicare, which is 1.45 percent on all earnings.

My solution is so stunningly simple, there must be something wrong with it. So I ask some experts.

My plan "will briefly result in a surplus," says Thomas R. Saving, professor of economics at Texas A&M University, but is not a long-term fix.

I understand. I'll get to that.

An unintended consequence of my idea "will likely be more income sheltered as capital gains and dividends," which could reduce both payroll-tax and income-tax revenue, warns David McClough, an economics professor at Ohio Northern University.

OK, got that. A manageable problem, I think.

Another caution comes from R.B. Drennan, chair of the Department of Risk, Insurance and Health Care Management at Temple's Fox School of Business. If the rich pay a lot more in, they'd get to take a lot more out when they retire. (The current maximum monthly benefit is $2,533.)

"You either take in more money or decrease what you are paying out or both," says Drennan. "You need a plan that everyone hates. They might hate it but agree that it works."

Hate? I can rock with that.

I say most workers will have to accept a (very) slow rise in the retirement age from 67 to 69, to reflect our rising life expectancy.

For the rich, the cap comes off and they will have to swallow some form of means-testing, meaning they may never get back from the system everything they paid into it.

We all might have to live with slower cost-of-living adjustments (COLA).

Even as I write this I hate it, but the plummeting revenue can't be ignored. Bankruptcy is two decades away if we twiddle our thumbs.

But I am optimistic. It is unimaginable that Congress would let Social Security - the most popular government program - go broke. Baby boomers, the most acquisitive generation in history, will punish any politician who does not protect their stuff even as, more than any other generation, they get the concept of the "common good."

Winston Churchill said Americans do the right thing - after they have tried everything else.

That's about where we are now. Grandpa needs an infusion.

Moving back the retirement age, killing the cap, means-testing, cutting COLA: They're all hateful.

But they would work.