Who’s Killing Social Security & Medicare?

If efficiency in government is measured by how fast major programs are going bust, we have a very efficient government. While we are moving rapidly toward fiscal insolvency, it turns out that fiscal insolvency is moving just as rapidly toward us. From Bloomberg:

The budget outlook for Social Security is getting dimmer, the U.S. government said, with its primary trust fund now projected to run dry three years sooner than anticipated.

The fund that helps finance benefits for 44 million senior citizens and survivors of deceased workers will be exhausted by 2035, the program's trustees said in an annual report yesterday. Aid would have to be cut at that point if Congress doesn't intervene.

Social Security's disability program, which helps support 11 million Americans, will run through its trust fund in 2016, two years earlier than predicted. The report attributed the fiscal stress in part to the weak economy.

The main trust fund that supports the Medicare health-care program for the elderly will run out of money in 2024, the report said.

Bear in mind that the trust funds are not assets that the government can draw on. They are liabilities on the treasury. When the trust funds are paying for the programs money is automatically transferred from the treasury to the programs without Congress yet having to take any responsibility. That means that programs are now putting enormous fiscal pressure on the rest of the budget.

I have been told by one of my cherished interlocutors that any concern about the future is a sign of mental illness. If so, then the trustees of the programs are suffering from the same. From the WaPo:

"Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare," the trustees wrote. "If they take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare."

For seven straight years the trustees have issued the same warning, to no avail.

On Monday, Treasury Secretary Timothy Geithner called Social Security and Medicare the "twin pillars of retirement security in this country," and he declared, "It is critical that reforms are slowly phased in over time so current beneficiaries are not affected and future beneficiaries do not experience precipitous changes."

President Barack Obama's health care law is supposed to trim Medicare expenses by $500 billion, extending the life of the program. But some independent experts doubt the full savings will materialize, and even the administration concedes more cuts are needed.

Okay. If it's critical to phase in reforms, shouldn't we start phasing in reforms? Shouldn't reforms be real reforms that actually do something about the problem?

In fact, the problems facing the entitlement programs are probably worse than the trustees can legally report.

The trustees conceded that their own Medicare projections could be too rosy. Based on current law, they assume cuts in payments to doctors that Congress routinely waives will actually take place. They also assume the health care law will squeeze the full amount of its cuts from the program.

"Medicare's actual future costs are highly uncertain and are likely to exceed those shown ...in this report," the trustees said.

For two years the Democrats had the White House, the House of Representatives, and a filibuster proof majority in the Senate. They did nothing to advance the reforms that the trustees and Secretary Geithner acknowledge as necessary. Neither the Administration nor the Democrats in Congress have offered anything since. What have they done? Again from the WaPo:

In a blow to the Obama administration on Medicare, government auditors Monday called for the cancellation of a costly bonus program for private health plans that congressional Republicans have criticized as a wasteful political ploy.

The nonpartisan Government Accountability Office said it's not clear that the $8.3 billion Medicare Advantage bonus program will improve quality because most of the money is going to plans just rated average. The auditors did find, however, that the bonuses would temporarily ease the pain of unpopular cuts to insurance plans under President Barack Obama's health care overhaul law.

In other words, the GAO auditors confirmed what the Republicans are saying. The $8,300,000,000 program is doing nothing useful, except politically. It's hiding the pain involved in the Affordable Health Care act until after the election.

If it's true that a concern for the future and a willingness to offer solutions is a sign of mental illness, then the Republican Party and yours truly are in need of counseling. The Democrats, by contrast, are invincibly healthy.

Comments

[Donald Pay]

Nobody who is paying attention to this issue is at all frightened. Social Security is in great shape,and there is plenty of time to address the issue. By the way you seem to be getting your reports of dire problems in social security from people who don't really know much about it. All we need to do is make modest adjustments to the tax. I'd favor doing this right now, as then any changes needed would be less of a tax bite. There is no need to adjust benefits.

Here's a better story.

http://www.reuters.com/article/2012/04/24/us-column-socialsecurity-idUSBRE83N11H20120424

[Ken Blanchard]

Right, Donald. The TRUSTEES of Social Security and Medicare and the SECRETARY OF THE TREASURY aren't paying attention to the issue and don't know much about it. Glad you filled us in on that. Social Security is in great shape! Glad to hear it! I will have to spend an afternoon on Planet Pays some day. It must be relaxing.

[Stan Gibilisco]

My thoughts:

1. Eliminate the payroll tax cap. This measure might actually allow for a slightly lower rate while mitigating the regressive nature of the tax.

2. Gradually increase the retirement age to 70, subject to certain exceptions (for example, physically demanding jobs).

3. Institute some form of means testing to make sure that the people who need the benefits the most are the ones who get the most.

4. Stop dilly-dallying and act decisively right now. Otherwise, at some future point, we'll all end up paying a value-added tax (VAT) on top of all the other taxes we now have, and the VAT is another regressive tax, like the South Dakota sales tax which applies to everything.

5. Dream on, Stanley.

[Bill Fleming]

SS policy has been adjusted before and will be again as necessary to sustain the program. Your neurosis, KB (to the degree you have one) is your either a failure to recocognize this fact, or a willingness to intentionally mislead people about it. Personally, I'm just writing it off to your being somewhat partisan in a political year... a factor which begs a considerable amount of forgiveness. ;^)

[Donald Pay]

KB has lots of whine, but no beef. Can anyone point to any of KB's posts on the supposed social security disaster in the making and find one proposal for a solution? It's interesting that KB gets out his megaphone to point out this dire emergency, but has not answer for this "emergency." That's why we kow this is just echochamber spin, not a serious problem.

[Ken Blanchard]

My interlocutors here are determined to ignore the advice of the Trustees of Social Security and Medicare and the Treasury Secretary. Social Security has been adjusted before and it will be adjusted again, Bill tells us. Go back to sleep!

I would suggest that, when something is continually adjusted, that might mean a failure to come to grips with the structural problem. I would also boldly state, with the Trustees and Secretary Geithner backing me up, that sooner would be a lot less painful than later.

Contrary to what Donald says, I have frequently said what I think the solutions to the problem of Social Security are. My recommendations employ common sense and track well with Stan's above. Make the SS tax scheme a little more progressive; make cost of living advances more rational; raise the retirement age. I happen to agree with Donald that Social Security is relatively easy to fix. Has the Administration offered any concrete proposals to fix it? No.

Medicare is a much more difficult problem. Both of these major entitlements are putting enormous pressure on the general budget. I say it is the responsibility of the White House and the Senate to offer solutions. I understand why my friends here are only concerned to excuse their inaction.

[Donald Pay]

If you are going to run government as a business you had better get over the idea that "...when something is continually adjusted, that might mean a failure to come to grips with the structural problem." It's clear you've never been involved in business operations. Businesses constantly adjust, because "the structural problem" is faced every day.

I could support making the SS tax more "progressive," but I doubt conservatives would agree, or they would define a regressive change as progressive. But I'm willing to listen if you want to flesh out the details.

I think most people think cost of living adjustment should more accurately reflect the costs to seniors of their actual expenses. I'm not sure this would necessarily result in savings, however.

Raising the retirement age has substantial negative impacts on the economy. The elite and the bean counters look at this as a minimal problem, but they generally "work" in jobs that aren't physically demanding. A person who has spent years in construction or manufacturing is likely not going to be able to work as productively as a younger worker. It's really not something businesses that have looked at the impacts on their business will support. Businesses with older workers will have increased costs of health care, increased benefit costs, increased costs for workers comp, increase, and greater exposure to lawsuits. You have to look at things overall. Increased retirement age is bad for the economy.

[duggersd]

Or perhaps we should scrap the SS plan all together and adopt the Galveston plan that seems to have better benefits for the retirees. http://www.nytimes.com/2011/09/18/us/how-privatized-social-security-works-in-galveston.html?pagewanted=all The Chilean model has worked quite well as well. But I am sure liberals would not like that because then they would not be able to accuse the Republicans of wanting to take away their Social Security. It is all about power. Unless the federal government is willing to give up some power, we will be facing this mess all of the time. BTW, look what happened when W proposed allowing Americans to keep just a little of the money for themselves. Even the Republicans abandoned him. Every day I have to look at my children and tell them that at one time I thought there might actually be something there for them. At least they are smart enough to put money away on their own, because I doubt there is anybody in government with the guts to take care of it now.

[Donald Pay]

That's the Ryan plan for social security---privatize it so the Wall Street crooks can rip people off one at a time. That's DOA. Even Mitt has abandoned the Ryan privatization plan, unless, of course, he decides to pull a triple, triple flip flop, which is, of course, the trick Mitt has perfected.

[Ken Blanchard]

Donald: like the President and the Senate, you have nothing to offer but inaction. Your view that younger workers are more productive than older ones is absurd. You steadfastly avoid reality. Older workers do not impose less of a burden on their employers by retiring, if they have insurance through their employer. If not, someone has to pay for it.

Your way has failed. All you can do is strive valiantly to make sure that no other way succeeds.

[duggersd]

Donald, we have two examples of retirement systems that have not failed and in fact have done better than what SS provides in most measures. In Chile, workers were offered to old system or the new system. 95% of the people CHOSE the new system. I bet if you ask people on the plan in Galveston Co. if they are happy, you would get a resounding yes. In my mind, I would even go one step further. I would allow the workers to choose whether to participate. If they choose not to, then they would be responsible for their retirement. And if they are broke because they chose not to participate, so sad, too bad.

[Donald Pay]

Inaction? I'd raise the tax cap. If Republicans would agree, it would be fixed in two seconds. They won't. Do you not understand the poltical system?

[duggersd]

Why is it your solutions always seem to take something from someone whom you believe can afford it and give it to someone else whom you believe needs it? And if someone can do it by another means, it is because they are "crooks"?

[My Boomer Nation]

Social Security and Medicare are dinner. Yet both are insurance, not welfare, programs funded by (worker-employer) payroll tax deductions. They're contractual federal obligations to eligible recipients who qualify. You'd never know it the way both programs are publicly discussed, explaining everything but the truth. More on that below.

[Gaylord Security]

The ECB is “in hiding,” Garcia Margallo is cited as saying to reporters, according to FAZ. The bank’s “doing nothing to douse the fire” of Spain’s sovereign debt.