http://www.truthout.org/family-friendly-cuts-social-security-the-myth-affluence-testing59556Billionaire Wall Street investment banker Peter Peterson has come up with a focus group tested term for his plan to cut Social Security. He calls it "affluence testing." The idea is that we will just cut Social Security benefits for wealthy people like Peterson who don't need their Social Security. We won't touch benefits for ordinary working people.
That's a great story. Unfortunately, it has nothing to do with the debate over cutting Social Security. The problem with the Peterson story is there are very few wealthy elderly. We can zero out the benefits for Peterson and his wealthy friends and nothing in the Social Security accounts would change. Social Security's maximum benefits are just a bit over $30,000. Taking away $30,000 from a few thousand families makes no measurable difference in a program that spends $700 billion a year.
Getting a bit more realistic, let's suppose that we decide that $100,000 is the cutoff for affluent families. This is less than half of the $250,000 a year that President Obama sets as the cutoff for being subject to tax increases. A bit less than 10 percent of families over age 65, or 2.4 million, have an income of more than $100,000 a year. If we zeroed out their Social Security benefits, then we could save $70 billion a year, assuming they get an average of $25,000 a year from the program.
This 10 percent saving might seem a good start to reducing spending, but this requires a bit closer look. Suppose $100,000 is set as a cutoff, where you lose all benefits if your income crosses $100,000. This creates an enormous incentive to keep your income under $100,000. To be serious about this sort of affluence test it must be phased in gradually.
Much more at the link above --