A week ago yesterday, we growled, based upon an Investor's Business Daily (IBD) editorial, and asked if Social Security reform was possible in the next four years. According to the lead editorial in the past weekend's IBD, the newspaper wrote, "No matter who wins in November, it’s a virtual guarantee that Social Security reform won’t happen over the next four years. And that only means that the changes needed will be far more painful."
It was no surprise, then, to read the analysis of the Committee for a Responsible Federal Budget when the Social Security and Medicare Trustees released their annual annual report today on the financial status of the two programs. They wrote:
"The projections show that both programs are in dangerous fiscal positions and prompt action is necessary to secure these programs."
In their analysis, the Committee focused "specifically" on Social Security, and identified five key findings:
- Social Security is Heading Toward Insolvency.
- Social Security’s Deficits are Large and Growing.
- The Shortfall is the Same as Last Year, Despite a Short-Term SSDI Fix.
- Failure to Act Will Lead to Large, Abrupt Benefit Cuts.
- The Latest Projections Highlight the Need to Focus on Solvency First.
Writing about the march towards insolvency, the Committee points out, "When the Social Security trust funds are exhausted in 2034, beneficiaries will face an immediate across-the-board 21 percent benefit cut. The size of the cut will grow over time, to 26 percent by 2090." The following graph is from CRFB's analysis:
Growls readers can read the CRFB's entire analysis, which is supplemented with very helpful charts; it is available here. In their conclusion, they write:
"The Social Security Trustees once again show the need to reform Social Security to make it solvent for future generations. The combined Social Security trust fund will run out of money within 18 years – when today’s 49-year-olds are just reaching the normal retirement age. Failure to make any changes would result in a 21 percent across-the-board benefit cut, a cut that would grow over time.
"Fortunately, the Social Security’s finances can still be fixed without making drastic tax or benefit changes. If policymakers are willing to act soon, they can develop and pass a plan that strengthens the program’s finances while phasing in changes gradually to give workers time to prepare, improving benefits for vulnerable beneficiaries, and promoting long-term economic growth. However the cost of delay is substantial and would take away the opportunity to act more gradually and thoughtfully."
You can read the Trustees' "Summary of the 2016 Annual Reports," here.
The Concord Coalition also advocates for a fiscally responsible federal government, and also commented today on the Social Security and Madicare Trustees reports. In their press release today, the group said in part:
"Today’s reports from the trustees of Social Security and Medicare confirm once again that these critical programs are on unsustainable paths and will put increasing pressure on the rest of the federal budget in the years ahead, according to The Concord Coalition.
"Concord urges the American public, elected officials and candidates for federal office this year to carefully consider the warnings of the trustees, who each year emphasize the need to quickly start reforming these programs.
“The trustees do not issue these reports for their own amusement,” says Concord Executive Director Robert L. Bixby. “The annual reports are required by law with the expectation that responsible lawmakers will heed their warnings and take appropriate action.”
“For the past several decades,” Bixby added, “that has been a vain hope. Time is now running short. The longer we delay corrective actions, the more difficult they will become and the more onerous the burden will be for future generations.”
"Today’s reports again show that Social Security and Medicare Part A (Hospital Insurance) are paying out more than they take in from their designated payroll taxes.
"In addition, still more general federal revenues are required to support Medicare Part B, which provides various medical services, and Part D, which helps pay for medication. The premiums that older Americans pay for these parts of Medicare only cover a fourth of the costs."
Earlier today, Forbes columnist Tim Worstall concluded:
" . . . The first major US political fight I can remember observing was the Social Security reforms of the 80s. All sorts of plans were put forward and bandied about. And what happened then was the result of exactly what I’ve diagnosed here – promises that politicians didn’t raise the cash to meet. So, the solution was to raise the taxes paid by those still in work so as to meet the promises to the earlier generation.
"This is what will happen again. The working young will be forced to pay more taxes for the things that were promised to their elders. It might even be true that most would be happy to do so to keep Grandpop independent and out of their spare bedroom. But it will still be the culmination of what some have been stating for decades. Contribution rates simply haven’t been high enough to pay for the benefits promised. On the very simple grounds that this is how politicians get elected, by promising sweeties and only charging half price for them. And as long as such systems, just like public sector pensions, are run by politicians that will always be our problem."
Other news coverage of the Trustees annual reports included:
- CNN * Money, which said, "If lawmakers don't act, Social Security's trust fund will be tapped out in about 18 years," was "one takeaway."
- Wall Street Journal (beware paywall). The lede said, "Medicare and Social Security will begin to spend more than they earn by the end of this decade, new projections showed Wednesday, putting a spotlight on an issue that has seen scant discussion in an election year—the programs’ solvency challenges facing the next president."
- Reuters chose to focus on the Medicare program, and began with the lede, "The U.S. federal program that pays elderly Americans' hospital bills will exhaust its reserves in 2028, two years sooner than last year's estimate, trustees of the program said on Wednesday, but spending growth remained within forecasts."
Unfortunately, a Bing search produced very few stories in the so-called mainstream media.
At the moment, some Democratic members in the House of Representatives are holding a sit-in over gun legislation while Democrats in the Senate held four votes earlier in the week, according to CNN*Politics. Guess such political displays are the modern day version of "Bread & Circuses" held in Rome 2,000 years ago. Apparently, it's easier to stage such political displays rather than find ways to solve the promises made by earlier members of Congress, as noted by Tim Worstall above.
So take a few minutes to write your representatives in Congress. Find out what they are doing to ensure that Social Security and Medicate are sustainable for the children and grandchildren of today's Americans. Contact information is available at the Library of Congress' Thomas website (use left-hand column). Taxpayers living in Virginia's Arlington County can contact:
- Senator Mark Warner (D) - write to him or call (202) 224-2023
- Senator Tim Kaine (D) -- write to him or call (202) 224-4024
- Representative Don Beyer (D) -- write to him or call (202) 225-4376
Ask for a written response. And tell them ACTA sent you.