For a program everyone agrees is not in crisis, there sure are a lot of proposals swirling around to "reform" Social Security. There are even a lot of non-proposals, some of which you can find in President Obama's just-released 2012 recommended federal budget.
The "big three" entitlement programs—Medicare, Medicaid, and Social Security—have long been the elephants in the room for our enormous deficit problems. They consume 60 percent of federal spending and will be at 70 percent before you know it. Any effort to curb spending on these programs is absent from the President's budget. And while Republicans complain about how wimpy the White House's proposed budget cuts are, they aren't eager to tackle entitlements, either. They're hardly alone.
[See 10 Ways to Improve Your Finances in 2011.]
The public may lament the trillions of dollars that's been added to the national debt in recent years. And it may have sent a lot of Tea Party legislators to Congress to "fix things." But opinion surveys show that people don't want to do away with, or even weaken, the big safety-net programs.
Senior medical spending is at the heart of the issue for Medicare and a major factor in Medicaid. It's even an important consideration in Social Security benefits, given that rising health costs are a dominant concern among seniors who depend on Social Security. And in case you hadn't noticed, the future of all healthcare costs is up in the air due to the embattled health reform act, whose overturn is being aggressively sought by Congressional Republicans and in several court challenges supported by many state governments. Even if you wanted to cut senior medical costs, where would you even start these days?
Of course, it is nearly inconceivable that any elected official would publicly call for reduced support of senior healthcare. Just the hint of proposing cost-saving discussions with seniors about end-of-life care decisions brought forth claims of death panels and forced the White House into an embarrassing retreat (by the way, end-of-life consultations are linked with both lower costs and extended life spans). Logic is trampled under the feet of a charging entitlement elephant every time.
Yet our leaders all know that entitlements must be cut. But how to get there and escape with one's political life? There's the rub. So, instead of proposals, we have positioning statements. And this is really what the Obama 2012 budget is at this point. In public-relations speak, our leaders are engaged in a huge framing job. They seek to gain the high ground for how to discuss the deficit and how to position themselves to voters.
[See Public Supports Continued Strong Senior Benefits.]
As far as Social Security is concerned, the President's National Commission on Fiscal Responsibility and Reform included very specific reform ideas in its final report. President Obama endorsed the group's work. But you won't find any of these ideas in his 2012 budget message. What you will find are six principles the President says will guide him in any Social Security reforms:
•Any reform should strengthen Social Security for future generations and restore long-term solvency.
•The Administration will oppose any measures that privatize or weaken the Social Security system.
•While all measures to strengthen solvency should be on the table, the Administration will not accept an approach that slashes benefits for future generations.
•No current beneficiaries should see their basic benefits reduced.
•Reform should strengthen retirement security for the most vulnerable, including low-income seniors.
•Reform should maintain robust disability and survivors' benefits.
[See 4 Retirement Pillars Have Serious Cracks.]
I have read these "principles" several times. They leave precious little room for any reform proposal that does not use higher payroll taxes as the primary tool for narrowing Social Security's long-term payment gap. The most likely approach is to raise or lift entirely the maximum annual wage income that is subject to the Social Security payroll tax. Right now, that ceiling is $106,800. I certainly wouldn't mind using higher payroll taxes as one of the tools for rebalancing Social Security for the next 75 years. Raising the retirement age for younger workers is also a possible adjustment. But trying to make Social Security self-supporting again without asking any hard questions about benefit levels is reflective of the thinking that got us into this fix in the first place.
And Social Security, it needs to be stressed, is the easy fix here. Under current rules, Social Security projects it will be able to pay all promised benefits in full until the year 2037. At that time, it would be able to pay them only at 78 cents to the dollar. Closing this gap should not involve anything like the really hard and nasty cuts in store for Medicare and Medicaid. I can't wait to see the principles for those reforms. In the meantime, if you'd like to refresh yourself on some of the thoughtful deficit-reduction proposals that do include entitlements, check out a recent Urban Institute summary.
Twitter: @PhilMoeller
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Johnny Jeans of TX 12:40PM March 10, 2013
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