Mnuchin’s retirement fantasy
Trustees overseeing Social Security and Medicare issued yet more warnings this week about the worsening financial health of the programs. In response, Treasury Secretary Steven T. Mnuchin told Americans not to worry — the rip-roaring economic growth the Trump administration is whipping up will take care of everything! Except that it won’t, and pretending that the looming funding shortfalls will magically fix themselves is irresponsible and cowardly.
The reality is that the aging U.S. population leaves a decreasing number of workers to pay the payroll taxes that cover the cost of Social Security’s retirement and disability benefits and Medicare’s hospital coverage. Meanwhile, Medicare is being strained by a burgeoning retiree population and rising healthcare costs.
So here’s what the numbers say now. The Social Security Trust Fund has started to shrink, with tax revenue and interest no longer covering the annual cost of benefits to about 62 million Americans. By 2034, the trustees estimate, it will be gone, forcing benefits to be cut by nearly one quarter.
The problems in Medicare are more immediate, according to that program’s trustees. The trust fund supporting Medicare’s hospital benefits is expected to run dry in only eight years. Without it, hospital benefits would face steeper and steeper cuts, starting at 9% in 2026 and growing to 22% in 2040. Other parts of Medicare face similar budgetary challenges.
Washington has a number of options. Congress could take steps that raise the revenue coming into the Social Security Trust Fund — for example, by applying payroll taxes to more of a person’s annual wages (the cutoff now is $128,400) or to more types of income than just wages. It could also take steps that reduce the amount of money flowing out of the trust fund — for example, by raising the age at which people can collect full retirement benefits. Similarly, for Medicare, it could bring in more money (through higher payroll tax rates, for example), or it could work more aggressively to tamp down healthcare costs.
The problems have been evident for more than a decade, yet lawmakers have been loath to raise taxes or cut benefits. The longer lawmakers wait to make any of these changes, however, the more dramatic the changes will have to be in order to eliminate the shortfall. That’s not politics, that’s math.
Mnuchin’s prescription? Count on tax cuts, deregulation and the administration’s whipsaw trade moves to “generate the longterm growth needed to help secure these programs and lead them to a more stable path.” Yes, and tax cuts pay for themselves, climate change is a Chinese hoax and there really was a pedophile ring operating out of that pizza restaurant in Washington, D.C.
That’s a dangerous fantasy. This administration seems to have the stomach only for pandering to its base with handouts and protectionist tariffs. It doesn’t have the guts to confront the difficult fiscal problems that threaten the programs relied on by millions of older Americans.