President Bush and his allies would like the experts to find a crisis in Social Security to help sell the president’s private accounts and other Social Security reforms. This week the experts found a crisis, all right, but it wasn’t Social Security; it was Medicare.
A report by the Social Security and Medicare Boards of Trustees reaffirmed that the cost of Social Security benefits will exceed the tax revenues that pay for them by 2017 and that the IOU bonds built up to pay for benefits after 2017 will be exhausted by 2041.
“Fixing” Social Security may be politically difficult, but arithmetically it’s not. The trustees said an immediate increase of 15 percent in the payroll taxes or a 13 percent benefits reduction or some combination of the two would balance Social Security for the next 75 years.
In any case, the trustees said, the financial outlook for Social Security has “improved marginally” since 2000, and the long-term cost of Social Security, the government’s largest single program _ now about 4.2 percent of GDP _ will rise to a hair over 6 percent of GDP and stay there for the next 75 years.
However, a message added to the report from the public trustees said, “In sharp contrast, Medicare’s financial outlook has deteriorated dramatically over the past five years and is now much worse that Social Security’s.”
Medicare actually went into deficit last year, and the date its trust fund of accumulated IOU bonds will be exhausted is 2020. In other words, the situation that Bush is trying to avert for Social Security is already here for Medicare. The cost of Medicare, about 2.3 percent of GDP today, rises in a straight line to almost 14 percent of GDP in 2080.
The longest-term projections the trustees use are 75 years, but the Bush administration likes to project costs to infinity because they generate scary huge numbers to make its case. That’s why the White House sometimes says that if we don’t act now we’ll have to come up with $11.1 trillion to pay Social Security benefits indefinitely. For purpose of comparison, that same figure applied to Medicare is $65.4 trillion.
The Bush administration says the trustees’ numbers only bolster the president’s case for Social Security reform. What these numbers do is make a much more pressing case for Medicare reform.
(Contact Dale McFeatters at McFeattersD(at)SHNS.com)