So­cial Se­cu­rity and Medi­care fi­nances raise con­cerns

Some worry lack of easy fix will de­lay nec­es­sary ac­tions

Albany Times Union - Sunday - - FROM THE COVER - By Ri­cardo Alonso-zaldivar As­so­ci­ated Press Washington

An un­ex­pected weak­en­ing in the fi­nances of So­cial Se­cu­rity and Medi­care has raised con­cern about the bedrock pro­grams for the mid­dle class. The prob­lems may only keep get­ting worse in a time of po­lit­i­cal ten­sion and deep par­ti­san di­vi­sions.

Here are some ques­tions and an­swers on an is­sue that ul­ti­mately will af­fect ev­ery Amer­i­can fam­ily and isn’t go­ing away:

What’s new?

The government’s an­nual Trus­tees Re­ports on the pro­grams shows the fi­nan­cial con­di­tion of both wors­en­ing sig­nif­i­cantly since last year. The pro­jected in­sol­vency for So­cial Se­cu­rity stayed un­changed—in2034—but Medi­care’s moved three years closer, to 2026.

A more im­me­di­ate warn­ing sig­nal caught the eye of ex­perts.

Both pro­grams will start tap­ping their re­serves this year, mean­ing that in­come from pay­roll taxes and in­ter­est earned by the So­cial Se­cu­rity and Medi­care trust funds will no longer cover costs. That thresh­old was still a few years away in the 2017 checkup.

“The near-term out­look in both pro­grams got sub­stan­tially worse,” said Repub­li­can econ­o­mist Charles Bla­hous, a for­mer pub­lic trustee help­ing to over­see pro­gram fi­nances. “What is un­usual in the space of one year is to go from some­thing that isn’t sup­posed to hap­pen for four or five years to some­thing that’s hap­pen­ing right now.”

As a re­sult, So­cial Se­cu­rity and Medi­care will need a $416 bil­lion trans­fer from the government’s gen­eral rev­enues this year, when the federal deficit is shoot­ing up be­cause of tax cuts and in­creased spend­ing.

Should we be wor­ried?

“Yes,” said Leon Panetta, a Demo­cratic el­der states­man who held many government posts over a long ca­reer, from Cal­i­for­nia con­gress­man to White House bud­get di­rec­tor, de­fense sec­re­tary and CIA di­rec­tor.

“What peo­ple have to worry about is that in a democ­racy we gov­ern ei­ther by lead­er­ship or by cri­sis,” Panetta added. “What you are look­ing at right now is a sit­u­a­tion where cri­sis is go­ing to be driv­ing de­ci­sions. Rather than fix­ing it to­day, which is what we should be do­ing, we’re sim­ply go­ing to post­pone the day.”

Panetta is co-chair of the Com­mit­tee for a Re­spon­si­ble Federal Bud­get, a non­par­ti­san watch­dog group.

What’s wrong with wait­ing?

“A lot of peo­ple in Congress are fo­cused on what’s go­ing to hap­pen to­mor­row, not what’s go­ing to hap­pen in 2026,” ob­served Rep. Frank Pal­lone, D-N.J.

But wait­ing in the con­text of So­cial Se­cu­rity and Medi­care in­flicts more pain, lead­ing to big­ger tax in­creases, ben­e­fit cuts as high as 20 per­cent, or some com­bi­na­tion of both, as the pro­grams slide deeper into the hole.

Younger peo­ple, less likely to be fol­low­ing the de­bate, have the most to lose.

“Re­ally the sys­tem is fine for older peo­ple; it’s not fine for younger peo­ple,” said Robert Bixby of the Con­cord Coali­tion, a non­par­ti­san group that ad­vo­cates bet­ter con­trol of federal bud­get­ing.

“Peo­ple un­der 50 are pay­ing into a sys­tem that can’t af­ford to pay them the ben­e­fit it’s promis­ing them, and I don’t think they re­al­ize it. The more we de­lay re­forms, the more sud­den and dra­co­nian they would be, es­pe­cially for younger peo­ple.”

What are some pol­icy op­tions?

They boil down to tax in­creases and ben­e­fit cuts, with an ef­fort to spare cur­rent re­tirees of mod­est means.

Op­tions for So­cial Se­cu­rity in­clude lift­ing the limit on which pay­roll taxes are levied (now $128,400), re­duc­ing an­nual cost-of-liv­ing in­creases, rais­ing the un­der­ly­ing pay­roll tax rate, chang­ing the ben­e­fit for­mula, and rais­ing the full re­tire­ment age (now grad­u­ally ris­ing to 67).

Op­tions for Medi­care in­clude rais­ing the el­i­gi­bil­ity age — now 65 — to match So­cial Se­cu­rity’s, cut­ting pay­ments to med­i­cal ser­vice providers, rais­ing pre­mi­ums for ben­e­fi­cia­ries, and rais­ing the pay­roll tax.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.