Social Security reform
This appeared in the Washington Post:
House Speaker Kevin McCarthy (R-Calif.) announced last week that cuts to Social Security and Medicare are “off the table” in negotiations over raising the debt ceiling. In so doing, he deprived Democrats of a political talking point and reduced the likelihood of national default. Raising the debt ceiling — and thereby preserving the full faith and credit of the federal government — should proceed without negotiations or strings, let alone a contentious debate about third-rail entitlement programs.
Yet the discussion needs to happen sometime, and sooner rather than later. These entitlements — which already account for about a third of federal spending — remain on unsustainable trajectories, and protecting them for future generations is too important to keep reform off the table indefinitely.
Medicare’s trust fund is projected to run short by 2028, and Social Security will exhaust its reserves by 2034. When that happens, seniors face an immediate 25 percent cut in benefits. Clamoring for bailouts will be intense, but the country will struggle to afford them — especially in the looming era of higher interest rates, which make it more expensive to service the national debt. The longer Congress puts off fixes, the more painful they will become for the 66 million seniors, and growing, who receive monthly Social Security payments and the approximately 59 million people enrolled in a Medicare plan.
We applaud anyone in either party who works in good faith to help shore up the solvency of these old-age programs. Sens. Bill Cassidy (R-La.) and Angus King (I-Maine) have reportedly been talking about creating some kind of sovereign wealth fund that would be separate from the Medicare trust fund but could create future cash flow. Sen. Joe Manchin III (D-W.Va.) has expressed openness to raising the taxable wage cap for the program and perhaps creating a “supercommittee” to hash out a potential deal that could get an upor-down vote on the Senate floor.
The potential trade-offs aren’t painless, but some mix of benefit reductions and tax increases is necessary. Think about raising the Medicare eligibility age to 67 to match the existing Social Security retirement age for those born in 1960 or later. Perhaps raise premiums for Medicare beneficiaries with higher incomes. And maybe reduce Social Security benefits for those with higher incomes.