Where was the Washington Post with this when Bush was trying to get some traction with Social Security reform three years ago?
The federal budget is on an autopilot course to ruin. Spending on the three big entitlement programs -- Social Security, Medicare and Medicaid -- grows automatically, consuming a large and growing share of the budget with benefits that flow mostly to the elderly. Meantime, there is almost no public discussion about the trade-offs involved: Would the money be better spent on education, homeland security, defense or infrastructure? Even before the baby boomers retire, more than four dollars out of every ten go to these programs; if health-care spending increases at the current rate, within 40 years Medicare and Medicaid alone will amount to as large a share of the economy as the entire federal budget comprises today.---
Last week an impressive and ideologically diverse collection of economists and budget experts proposed an intriguing mechanism for forcing lawmakers -- and the next president -- to focus on the problem. The group, whose members come from think tanks ranging from the Brookings Institution and the Urban Institute to the Heritage Foundation and the American Enterprise Institute, would take Social Security, Medicare and Medicaid off autopilot growth and require lawmakers to set 30-year budgets. These would be reviewed every five years to determine whether the costs are set to remain within the allotted limits. If not, there would be automatic adjustments -- the experts' paper doesn't specify what those would be -- unless lawmakers acted to override this trigger.
It's a start. Yes, slapping Congress up side the head, and demanding some sort of accountability from them on the issue would be a start. As one of the budget experts, Alice Rivlin is quoted as saying, the status quo is not an option.
Those built in benefit increases, which are tied to the Consumer Price Index rather then the inflation rate, ought to be fair game for review, as should allowing citizens to invest some of their own retirement dollars, rather than have the government just spend them out of the general fund every year like any other tax dollar it collects. But any talk of reducing the rate of increase in benefits can expect to be spun by Democrats as a cut in Social Security, and thus off the table. And allowing a portion of citizens' Social Security taxes to be held in private retirement accounts, as a way to insure that at least some of their retirement dollars are actually being saved, has already been ruled out by Obama as a reform option to be considered in a Democratic administration. What you don't hear much of from Democrats is talk of the only other two remaining options...raising payroll tax rates...again...or raising the retirement age...again.
A Report from Heritage.org has some of the numbers in their own plan for a fix:
In the coming decades, the cost of these programs will leap from 8.4 percent of gross domestic product (GDP) to 18.6 percent of GDP—an increase of 10.2 percent of GDP. Without reform, this increased cost would require raising taxes by the current equivaÂlent of $12,072 per household or eliminating every other government program. Funding all of the promÂised benefits with income taxes would require raisÂing the 35 percent income tax bracket to at least 77 percent and raising the 25 percent tax bracket to at least 55 percent.Although aware of this coming crisis, Members of Congress have largely ignored it because all of the possible reforms are considered politically risky. Yet delays only increase the pain of the ultimate reforms, which are becoming about $1 trillion more expensive annually. Furthermore, many believe that Americans ages 55 and over should be exempt from any reforms. One-third of all baby boomers have already crossed that threshold, and at 4 million per year, all of them will have crossed it by 2019.
What appears to be brewing is a younger generation that will take a look at its aging baby-boomer population and say "screw you...you got us into this." And they'll be right. More from Heritage...
Entitlement reform is more than just an economic issue. Americans need to decide whether they want a future in which older Americans have an automatic claim on one-fifth of the future income of their grandchildren—who will be raising their own chilÂdren and paying off their home mortgages. Under the current system, retirees will spend one-third of their adult lives in taxpayer-funded retirement while national security, education, health research, and antipoverty programs fight for the few remainÂing tax dollars.
Read the whole sobering thing.
Having lacked the political capital to make a dent in the status quo on Social Security, and having signed the prescription drug plan into law, George Bush can only be said to have failed overall to stem the tide of irresponsible entitlement growth, which has been presided over by baby-boomer politicians of both parties.
Congress must learn that they had better grab onto that 'third rail', or we'll shock them right out of their seats. If only. I have no reason to think they'll get any pressure from an Obama White House to steer us away from the cliff. McCain's record on entitlement reform is "mixed". Obama, of course, has no record to speak of, but he suggests that allowing the Bush tax cuts to expire (raising your other income taxes) and raising the income ceiling for Social Security withholding will solve the problem. It won't even come close.
UPDATE 4/7: Just discovered this informative post by Tom Blumer at Bizzy Blog, which includes a helpful chart demonstrating how the large Social Security surpluses over the last dozen years have helped mask larger deficits, and how the declining revenues and rising outlays will catch up to us sooner than most people think.
Posted by dan at April 6, 2008 1:29 PM