Neither of the two men most likely to be elected president in November has what they can adequately describe as a viable plan to address the looming bankruptcy of America's two largest entitlement programs.
This week's news from the Social Security Administration and Medicare trustees should highlight how foolish that is. On Monday, the annual report from officials who run both old-age benefit programs confirmed once again that the clock is ticking on both. Social Security is expected to go bankrupt by 2035, and its portion of Medicare pays for hospital visits and expenses. Other health services will go bankrupt by 2036.
Although the two projected insolvency dates are a slight improvement from last year (when the trustees expected cash reserves to be depleted by 2034 and 2031 respectively), the severity of the problem cannot be discounted. If Social Security goes bankrupt, beneficiaries will automatically see their benefits cut by 21%. According to the Committee for a Responsible Federal Budget, a bankruptcy of Medicare's Hospital Insurance Trust Fund would automatically result in an 11% cut, which “is likely to result in significant disruptions to health care services for the elderly and disabled.”
That point is worth emphasizing. These benefit cuts are not the result of future choices that Congress and the President may make. This is reflected in the current status quo for both programs. Without policy change, this will eventually become reality.
This is a reality that neither President Joe Biden nor former President Donald Trump is willing to acknowledge. The two main contenders for the White House have pledged to block potential changes to Social Security. This is, in effect, a promise to keep the entitlement train running at full speed down a dead end road.
The Biden administration has criticized a plan drafted by some Republican lawmakers that would raise the retirement age to 69. This is a small change and not enough to avoid ruining Social Security. Trump, meanwhile, suggested in March that he could “eliminate” the welfare program and make other changes, but he quickly walked back those comments. During this year's Republican primary, the Trump campaign targeted Florida Gov. Ron DeSantis and former South Carolina Gov. Nikki Haley with ads that signaled a willingness to at least talk about the need for eligibility reform.
This should result in disqualification for both parties. The American people deserve to know how the next president will approach this issue. You don't need a perfect solution, but having no plan at all (which isn't surprising) shows a lack of seriousness.
“Many political leaders in both parties, from top to bottom, are choosing to agitate rather than actually solve this problem,” Maya McGinnis, chairwoman of the Committee for a Responsible Federal Budget, said in a statement. “As we enter the peak campaign season, it is our job as Americans and the voting public to demand that President Biden and President Trump present a realistic and detailed plan to prevent the trust fund from going bankrupt. And they must work with Congress. “There is not enough time to implement the plan.”
The best approach to Social Security would allow American workers more freedom to plan their own retirement, rather than siphoning off benefits to guarantee benefits for retirees who, in many cases, are richer than workers themselves are. This is what we do. Workers should be able to opt out of Social Security benefits as part of future changes.
Medicare's bankruptcy is a more complex issue, but one that should be addressed first through efforts to reduce health care costs rather than raise taxes on working Americans.
Still, bankruptcy is only part of the problems presented by the two creaky rights regimes. Both Social Security and Medicare are projected to run deficits every year between now and 2098 (the end of the 75-year budget period in the Board's report), and these deficits are a major cause of the federal government's increasingly difficult fiscal situation. Although neither program is expected to run out of cash in the mid-2030s, putting them on a more stable fiscal track will be important for long-term economic growth. Refusing to fix the spending side of the equation will likely guarantee massive tax increases over the next decade and beyond.
Over the 75-year budget period, total unfunded debt for Social Security totals $25.2 trillion, Cato Institute budget analysts Romina Boccia and Ivane Nachkebia noted. debt dispatch Substack Newsletter. To close that gap through taxes alone, Congress would have to increase the payroll tax rate from 12.4% to 17.5%. This is equivalent to raising taxes on the median worker by $2,450 per year.
““Congress must act now before these welfare programs become a bigger drag on people’s livelihoods as economic growth driven by higher taxes and government spending increases,” said Vance Ginn, a former White House economic adviser during the Trump administration. said. Posted in. “It won’t be easy politically, but the stakes are too great, the government failures that have brought us to this point are excessive and must be corrected with more free-market capitalism rather than a path to big government socialism. The situation is much more serious.”