Two Republican senators want to use the threat of an economic meltdown to raise the retirement age and cut Medicare. Sens. Bob Corker (R-TN) and Lamar Alexander (R-TN) introduced a plan today that would raise the federal debt limit by $1 trillion in exchange for $1 trillion in cuts to Medicare, Medicaid, and Social Security, as The Hill reported:

The Corker-Alexander dollar-for-dollar plan has several components.

It would structurally reform Medicare by creating competing private options giving seniors greater choice of healthcare plans. It would not, however, cap Medicare spending.

The plan would also give states more flexibility to manage Medicaid programs and prevent states from “gaming the federal share of the program with state tax charges.”

It would gradually raise the Social Security retirement age and use the “chained CPI” formula to calculate cost-of-living adjustments, curbing the growing cost of benefits.

In exchange, it would direct the debt limit be increased by the same amount as the savings generated from entitlement reform.

The U.S. will hit its debt limit on or around December 31st. The Treasury Department estimates that, using extraordinary measures, it could avoid default for another two months or so. Allowing the U.S. to default on its debt via not raising the debt ceiling could cause a complete financial meltdown. The 2011 debt ceiling debacle — during which House Republicans nearly pushed the country into a default due to their intransigence on taxes — cost the country about $19 billion in higher interest payments and at least one million jobs.

Corker and Alexander are threatening more economic chaos in order to achieve one of the most regressive potential policy changes. Though lawmakers point to America’s increasing life expectancy in order to justify raising the retirement age, life expectancy is only increasing for wealthier workers in non-physical jobs. As the Center for Economic and Policy Research put it, “there has been a sharp rise in inequality in life expectancy by income over the last three decades that mirrors the growth in inequality in income.”

Several CEOs — under the guise of a campaign known as “Fix the Debt” — have recently called for cuts to Social Security and other entitlements. Goldman Sachs CEO Lloyd Blankfein, for instance, said that “there will be things that, you know, the retirement age has to be changed, maybe some of the benefits have to be affected, maybe some of the inflation adjustments have to be revised.” “The solutions [to the fiscal cliff] are – it’s the retirement age; means testing Social Security and Medicare,” said Aetna CEO Mark Berolino. “We just need to get leadership.”

Of course, these CEOs have little cause for concern if government retirement assistance is cut, as they have millions of dollars squirreled away in their personal retirement accounts:

– The 71 Fix the Debt CEOs of public companies have average retirement assets of $9.1 million. Of these 71 CEOs, 54 participate in their company‘s retirement programs and have collective pension assets of $649 million, or more than $12 million per CEO — enough to generate a $65,873 pension check each month for life. In contrast, the average monthly Social Security check for retired workers is $1,237.

– A dozen of the Fix the Debt executives have more than $20 million in their individual company retirement accounts. If each of these CEOs converted their assets to an annuity when they turned 65, they would receive a monthly check for at least $110,000 for life.

Blankfein has nearly $12 million in retirement assets, while Bertolini has $1.5 million. Adding insult to injury, many of the CEOs calling for cuts to the social safety net are underfunding their workers’ retirement accounts:

Of the 71 publicly held Fix the Debt member companies, 41 provide employee pension funds for their workers. Of these, only two have sufficient assets in their pension funds to meet their expected obligations. The rest have underfunded their worker pension funds by $103 billion, or about $2.5 billion on average.

Since 1985, 84,000 pension plans have been eliminated. And now these CEOs are coming after the government programs upon which the elderly, and many others, depend.

According to White House Press Secretary Jay Carney, Social Security should not be on the table during negotiations over the so-called “fiscal cliff,” the set of spending cuts and tax increases scheduled for the end of the year. Carney rightly noted that Social Security has nothing to do with today’s deficits:

White House spokesman Jay Carney said Monday that Social Security is one entitlement program that should be addressed on a “separate track.”

“We should address the drivers of the deficit and Social Security currently is not a driver of the deficit,” Carney told reporters today.

Lawmakers are trying to craft a deal to prevent the “fiscal cliff” from occurring, and have pulled Social Security and health care programs into the negotiations. But Social Security is statutorily barred from adding to the deficit, and is fully funded for more than two decades, unlike scores of other federal programs. As Senate Majority Leader Harry Reid (D-NV) has explained, “Social Security has not added a single penny, not a dime, a nickel, a dollar to the budget problems we have. Never has. And for the next 30 years, it won’t do that.”

One simple change, raising the cap on the payroll tax so that it is applied to more income for wealthier Americans, would ensure Social Security’s funding for decades to come. But Senate Republicans — aided by wealthy CEOs — are trying to use the manufactured crisis of the “fiscal cliff” to justify cutting benefits upon which seniors and many others depend. Last year, Social Security alone kept more than 20 million people out of poverty.

Lloyd Blankfein — evidently taking a break from doing “god’s work” as the CEO of Wall Street behemoth Goldman Sachs — told CBS News’ Scott Pelley that he believes the retirement age needs to be raised because “in general, entitlements have to be slowed down and contained“:

BLANKFEIN: You’re going to have to undoubtedly do something to lower people’s expectations — the entitlements and what people think that they’re going to get, because it’s not going to — they’re not going to get it.

PELLEY: Social Security, Medicare, Medicaid?

BLANKFEIN: You can look at history of these things, and Social Security wasn’t devised to be a system that supported you for a 30-year retirement after a 25-year career. … So there will be things that, you know, the retirement age has to be changed, maybe some of the benefits have to be affected, maybe some of the inflation adjustments have to be revised. But in general, entitlements have to be slowed down and contained.

PELLEY: Because we can’t afford them going forward?

BLANKFEIN: Because we can’t afford them.

Maybe working until a later age is fine for a Wall Street CEO whose net worth is $450 million. But it’s simply nonsense to assert that the retirement age needs to go up because Social Security is no longer affordable.

For starters, Social Security can pay full benefits for decades without any changes at all. (Imagine the accolades that would received if any other federal program had guaranteed funding for that stretch of time.) One simple change, raising the cap on the payroll tax, can guarantee that the program will pay nearly full benefits for three-quarters of a century. In the meantime, Social Security is statutorily barred from adding one dime to the federal deficit, so cutting it doesn’t change the nation’s deficit or debt picture.

Raising the retirement age, meanwhile, adversely impacts those workers most in need of a robust social safety net. While a year or two of extra work may not seem like much to a Wall Street CEO with his cushy corner office, for a factory worker or janitor, it can mean real problems. Life expectancy is only increasing for wealthier workers in non-physical jobs. Poorer workers doing physical labor have not seen the same gains. Overall, raising the retirement age to 70 would “cut benefits for the average retiree by 19 percent.”

Social Security, the government entitlement that provides support to seniors in retirement, the disabled, and other Americans, has long been in the cross-hairs of budget reformers. The program’s trust fund currently won’t be spent out until 2033, and after that it would still pay 75 percent of scheduled benefits.

Most of the proposed solutions to the shortfall involve cutting back benefits and raising the minimum retirement age. Both are deeply problematic; at its current level of benefits Social Security kept over 20 million people out of poverty in 2011, many Americans in demanding manual labor jobs already take early retirement and thus reduced benefits as it is, and lower-income Americans have not particularly benefited from the average rise in lifespans .

This week, however, Sen. Mark Begich (D-AK) put forward a reform package that goes in the opposite direction, while still financially securing the program’s trust fund for roughly the next seven decades. The Washington Post’s Dylan Matthews laid out the details:

The Begich bill would lift the current payroll tax cap, which exempts wages in excess of a certain amount ($110,100 this year) from the tax. In turn, it would give high earners, who would pay more, additional benefits upon retirement, just as benefits increase as wages do for workers below the cap. […]

It also increases benefits across-the-board. While Bowles-Simpson and Domenici-Rivlin adopt a stingier “chained CPI” measure for inflation, Begich adopts “CPI-E,” or a measure that specifically captures inflation in goods that seniors buy.

Due to deteriorated health and other considerations, goods seniors buy tend to be more expensive than those younger people purchase. Begich’s CPI-E change would mean, effectively, a 4.5 percent benefit increase for the program’s beneficiaries, including not just seniors but their designated survivors and disabled Americans as well.

The Congressional Research Service ran the numbers back in 2010 and concluded that eliminating the payroll tax cap — while also paying out the new benefits to wealthier Americans in accordance with their new taxes — would eliminate 95 percent of the trust fund’s shortfall over the next 75 years.

Begich may not hit that goal exactly, depending on how the legislation is written. In particular, his change to CPI-E also lifts the overall benefit level, on top of the changes in CRS’ scenario. But his reform would probably come very close.

With the 2012 election over, attention has turned to the so-called “fiscal cliff,” the package of expiring tax cuts and automatic spending cuts that will hit at the end of the year unless Congress decides to avert it beforehand. The debt ceiling will also need to be raised soon, and the negotiations between Democratic and Republican leaders has already taken a familiar turn toward entitlement spending and new revenues, with House Speaker John Boehner telling ABC News that he’d be willing to consider talking about new revenues (sort of) if President Obama and Democrats get serious about entitlement reform.

“I would do that if the president was serious about solving our spending problem and trying to secure our entitlement programs,” Boehner said in an interview with ABC’s Diane Sawyer last night. “If you’re increasing taxes on small-business people, it’s the wrong approach.”

Senate Majority Leader Harry Reid (D-NV), struck a different tone. “We are not going to mess with Social Security,” Reid said yesterday, according to Reuters.

While entitlements have become a consistent focus of Republican leaders like Boehner, Majority Leader Eric Cantor (R-VA), and House Budget Committee Chairman Paul Ryan (R-WI), why they must be a part of the end-of-year negotiations isn’t quite clear. Though the media is quick to buy into the idea that Social Security is going broke, the program is fully-funded for the next two-and-a-half decades, a luxury that other important federal programs that are funded on a year-to-year (or budget resolution to budget resolution) never have.

Republicans in the past have ignored the easiest ways to ensure Social Security’s long-term future, proposing benefit cuts in the form of raising the retirement age or changes to the formula used to calculate benefits. Instead, raising or eliminating the payroll tax cap that funds the program could ensure its long-term viability for another 75 years, according to the non-partisan Congressional Research Service.

Medicare, meanwhile, has already been reformed, when Obama signed the Affordable Care Act in 2010. That law, which Republicans repeatedly tried to repeal, cut $716 billion from Medicare without touching benefits, making reforms to provider payments, eliminating fraud, and extending its solvency for eight years. While Republicans were quick to slam Obama and Democrats for passing those cuts during the 2012 elections, they often forget it when begging Democrats to “get serious” about entitlement reform.

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Elected officials, candidates who would like to be elected officials, and the media have reached a consensus that Social Security is broke and in need of immediate reform to ensure its long-term health. That consensus is false: the program has sustained itself for 75 years and is fully-funded until at least 2037, far longer than any of the other vital programs the government operates.

If lawmakers want to “fix” Social Security beyond that date, though, there is an easy solution: raise taxes on people like Kobe Bryant, the Los Angeles Lakers star who will earn nearly $30 million next year on the basketball court alone.

Bryant’s 2012-2013 salary, according to HoopsHype.com, is $27.8 million. Over the next two years, he will make more than $58 million. But because the amount of income that can be taxed to pay for Social Security will be capped at $113,700 in 2013, it will take Bryant just one-third of one pay day (counting his 82 game days as pay days) to maximize his contribution to the program, sports accountant Robert Raiola noted on Twitter yesterday:

Max amount of earnings sub to Social Security taxes will be $113,700 in 13. It will take Kobe Bryant 33% of 1days pay to reach. #NBA #Lakers

— Robert Raiola, CPA (@SportsTaxMan) October 22, 2012

Even giving Bryant credit for working 260 days, he would reach the cap after just more than one day.

Put simply, the Social Security cap forces a worker making America’s median income of $50,054 — or any income below $113,700 next year — to pay payroll taxes on 100 percent of their income, while nearly $27.7 million of Bryant’s income is exempt.

Lifting that cap, according to the Congressional Research service, would ensure Social Security’s solvency for the next 75 years while creating a long-term surplus for the program. That’s a far bigger fix than what would result from means testing benefits for the wealthy or raising the retirement age, the two most popular reforms among the “Social Security is broke” consensus.

Tea Party Rep. Kevin Brady (R-TX) went on CNBC today and within the course of about two minutes managed to call for extending the Bush tax cuts for the wealthy, while also hiking taxes on lower-income and working Americans. When asked by the host what he thought should be done about the upcoming “fiscal cliff,” Brady expressed frustration over the possibility that taxes could be hiked on “job creators,” the Republicans’ euphemism for the wealthiest 2 percent of the country:

BRADY: I think it’s irresponsible to drive off this fiscal cliff… What I worry about is the false choice we’ve been given right now which is either drive off that cliff and risk another recession, or raise taxes on the job creators and the professionals that actually would help get us out of the [economic hole].

A minute later, the host asked Brady what he thought about Social Security, and specifically whether he thought the payroll tax cut that was enacted in 2011 should be extended for another year.

One, the payroll tax holiday is blowing a hole in Social Security, which by the way has faced the largest deterioration in one year than in the last twenty years. And the disability program will go bankrupt in just four years. So clearly we can’t, as a nation, keep diverting one sixth of the revenue stream to that important program.

Watch it:

The payroll tax cut is not “blowing a hole” in Social Security’s finances. The language specifically uses general revenue to contribute to Social Security’s trust fund in lieu of the lost payroll tax revenue. The payroll tax is also regressive and thus falls especially hard on lower-income and working-class Americans — the Economic Policy Institute found that the payroll tax cut’s expiration would be one of the biggest hits to the economy in the upcoming fiscal cliff.

Conversely, EPI’s analysis also determined that, on a per dollar basis, allowing the Bush tax cuts to expire on upper income earners would do less damage to the economy than any piece of the fiscal cliff other than letting the estate tax cut expire. Even allowing the Bush tax cuts for middle and lower income Americans to expire would do more harm. So Brady is effectively calling for a tax hike on working Americans and a major hit to the economy, even as his party continues to insist on maintaining the Bush tax cuts for the wealthy. His preferred policy not only benefits the wealthy at the expense of everyone else, it’s also counterproductive to his own ostensible economic goals.

Recently, one of the few things both parties in Washington seemed to agree about was allowing the current payroll tax cut to expire on schedule in 2013. The payroll tax was reduced by two percentage points for workers and the self-employed as part of the tax deal at the end of 2011.

The White House has signaled disinterest in the tax cut’s fate; House Minority Leader Nancy Pelosi (D-CA) and Treasury Secretary Tim Geithner are both on record in favor of expiration. Even the AARP, the country’s leading advocacy group for seniors, piled on, arguing that another extension would undermine Social Security.

So far, the only major voice pushing the other way has been former economic advisor to the White House Larry Summers. But now it looks like he may have some backing in Congress:

Some Democrats in Congress are seeking to include an extension of the $120bn payroll tax cut in negotiations over the looming “fiscal cliff”, shaking what had appeared to be a bipartisan consensus to allow the measure to expire as planned at the end of the year. The move could complicate the budget talks due to begin after the November presidential election and alarm rating agencies – since the sunset of the payroll tax measure is the only big provision that both parties seem comfortable directing towards deficit reduction. [...]

Chris Van Hollen, the top Democrat on the budget committee in the House of Representatives, told C-SPAN television at the weekend: “I don’t think anyone thinks we should permanently extend the payroll tax cut but, given the situation we’re in, I don’t think that should be taken off the table.”

Absent a sufficiently stimulative replacement that has clear political viability, there are reasons to heed Van Hollen’s suggestion. For one, payroll taxes are regressive and fall harder on those lower down the income ladder, meaning the increase would fall on millions of already hard-pressed working Americans. For that reason, JPMorgan recently downgraded its GDP growth forecast for next year on the assumption the expiration will go through. Its conclusion was that an extension would help the economy more than an expiration would hurt it.

The Economic Policy Institute also estimated the holiday’s expiration would deliver one of the fiscal cliff’s biggest hits to economic growth next year. In fact, EPI’s analysis found it does more damage to the economy per dollar than to the budget. For most parts of the fiscal cliff, the opposite was the case. So by keeping some parts of the fiscal cliff while canceling others — such as the payroll tax holiday expiration — damage to both the economy and the budget could be minimized.

EPI acknowledged that the payroll tax cut as it stands is not optimal stimulus. But it added, “optimal policy responses are hard to come by these days.”

The tax cut’s threat to Social Security’s future is also overstated. The 2011 payroll tax holiday specifically required losses to the program’s trust fund be repaid out of general revenue. An extension would likely include similar language.