SOCIAL SECURITY’S ‘SLOW MOTION’ CRISIS SPEEDS UP
The economy added 213,000 jobs last month, a robust measure of growth. Some 600,000 people started actively seeking jobs, a signal of workforce optimism. Construction spending is up, unemployment claims are down. So isn’t this an ideal time to think about addressing the economic crisis that, in the euphoria of today’s boom, dares not speak its name?
Its name, of course, is the entitlements crisis. The threat of Social Security and Medicare spending in the future has the potential of wreaking far more havoc on the economy than the tariffs on China, Canada and Mexico — themselves no small factor in the economic calculus.
The United States Chamber of Commerce, hardly an alarmist organization, terms entitlements the “slow-motion crisis,” and in fact this crisis has been building for a generation. Congress shored up Social Security in 1983, when the late Sen. Daniel Patrick Moynihan of New York and former Federal Reserve Chairman Alan Greenspan cobbled together a compromise that salvaged America’s favorite welfare plan for 35 years.
So now the crisis summons us again, and we should not be surprised. Six years before Greenspan, a Republican, and Moynihan, a Democrat, released the Social Security overhaul that they thought would provide the $168.7 billion required to assure the system’s survival, President Jimmy Carter summoned two dozen members of Congress to the Indian Treaty Room of the White House. There, poor man, he signed a Social Security measure that he said would guarantee “that from 1980 through 2030, the Social Security System will be sound.”
So much for wishful White House thinking.
We are a dozen years away from 2030, and two major efforts to redeem Carter’s promise have failed to restore financial soundness to an oldage benefits program that dates to Franklin Delano Roosevelt.
“This crisis is substantively more urgent than ever, but politically it doesn’t seem to be urgent at all — a reflection of the disconnect between politics and reality in Washington today,” said former Sen. Judd Gregg of New Hampshire, a onetime GOP Budget Committee chairman. “
The source of the latest crisis: Baby boomers — those born between 1946 and 1964 — are retiring in great numbers, causing great strains on Social Security and, as they pass age 65, Medicare.
A generation ago there were 19 seniors for every 100 Americans between 18 and 64. But now, according to new census figures, there are 25 adults at age 65 for every 100 in the general working population, rising to 35 in only a dozen years. About 10,000 Americans turn 65 each day, and their benefits are supported by a working cohort composed of people born at a time of smaller birth rates. Plus this: Fewer babies were born last year than in any year in the last three decades.
Do the math. It is not pretty. The political calculation isn’t pretty either. President Donald J. Trump has said he doesn’t want to make adjustments in benefits, which isn’t any more irresponsible than the view of many of his predecessors and most congressional lawmakers, who know a losing issue when they see one. The solution requires higher taxes, or increases in the retirement age, not exactly popular positions. Of course the whole problem might be wrestled under control simply by raising the maximum taxable earnings, which this year is $128,400, or by eliminating the cap altogether, but you can imagine the lobbying effort by well-heeled Americans that would be set loose the moment that trial balloon floated upward.
But now that Social Security costs will exceed the system’s income this year for the first time in history — three years earlier than expected — perhaps Washington will pay attention. The Medicare crisis is separate but related; the threat there comes not only from the ratio of workers paying into the system against retirees drawing from the system, but also from growing health-care costs and increased life expectancy.
The clock is ticking. “This situation can’t last forever and someday we will have to pay the piper,” said Gregg, “and that will mean significant reduction in the standard of living of most Americans, especially those under 40.” If logic prevails, they will be the next angry Americans. We should welcome their anger.