(Or, how Bernie Sanders and Grover Norquist are destroying Social Security and Medicare)
As a person who is seeing her 65th summer in 2020, I was more disturbed than you probably were (depending on your age) to see this little gem pop across last night:
How soon coronavirus could deplete the government's major trust funds
The Social Security and Medicare trustees released a report in April looking at the state of the nation's most…
Here are the operative tidbits:
Without intervention, “all major trust funds will be out of money in just about a decade,” Marc Goldwein, a budget expert and a senior vice president at the Committee for a Responsible Federal Budget, said during a recent briefing. He suggests Social Security could be depleted by 2031 with other funds running low as early as next year.
A little background: The three major entitlements (Social Security, Medicare, and Medicaid) are funded by payroll taxes. That’s the “FICA” deductions you see on your paystub. All three of those funds have a “Trust Fund” that they dump that money into. (The government then immediately borrows that money from the Trust Fund and leaves an IOU in place of the money, but that’s a discussion for another day. Up until now, the government’s made good on what they borrow.)
For some decades now, the money flowing OUT of those Funds to pay Social Security checks and for Medicare/Medicaid bills has been greater than the money flowing IN to those Funds.
The Trustees that manage those funds (the Trustees are nonpartisan political appointees) each year submit a report to Congress which states the year during which they expect those Trust Fund balances (including the IOU’s) to reach $0.00. When that happens, the law automatically cuts the outflows to match the inflows from the payroll tax. So, people on Social Security will (based on current estimates) get checks which are 30% smaller than they do today, and people on Medicare will have to pony up 30% more of the costs than they do today.
The real world implications of this are huge, but you can (if you wish) imagine large numbers of senior citizens losing their homes and begging on the streets. Not pretty.
If that’s not grim enough, here’s more:
“We believe the Medicare trust fund for hospital insurance will run out by 2023,” says (Marc) Goldwein.
Like with Social Security, nobody is certain what would happen if the Hospital Fund runs low. “We think the most likely scenario is that what the law says is we’d actually have to delay payments to providers,” said Goldwein — which would mean health care providers wouldn’t “ever want to see Medicare patients, because they know they won’t get paid on time, if at all.”
Pleasant thoughts, eh?
Regarding Social Security, the “fix” has been known for some time. As a math problem, it’s not particularly difficult; adjust inflows (e.g., taxes) upwards, or adjust outflows (e.g., payments) downwards. The good news is that this is a 75-year forward looking analysis, so that gives you some ways to finesse the outflow adjustment so it’s less painful than actually making checks smaller. Here’s some of the ideas that have been floated:
(A==>) Raising the full retirement age (today, 66 years 2 months for those born in 1955). This idea has lost some steam in the past few years, because life expectancy in the US stopped increasing.
(B ==>) Raising the eligibility age (today, you can retire at 62, with reduced benefits)
(C ==>) Changing the formula by which annual increases are calculated, decreasing the projected future increases.
(D==> ) Lifting the “cap” after which payroll taxes are no longer deducted (in 2020, the cap is gross income of $137,700)
(E==>) Tweak (or even means test) the benefits formula, so that wealthy citizens get smaller checks (or none at all)
(F==>) Raise the payroll tax that pays for SS (currently 12.5% of gross pay, paid for half by the employee and half by the employer).
Medicare is quite a bit more complicated, because there are variables at play over and above simple actuarial math. But an increase of the Medicare/Medicaid payroll tax from 1.45% (the employee and employer both pay 1.45% of gross) to 1.85% apiece would probably do the trick for quite a few years.)
The above seems simple, yes? I mean, what worker wouldn’t pay an additional .4% (for a worker making the average salary being paid biweekly, that $8 a paycheck) knowing that it’s giving them medical coverage when they retire? And what employer is so under-capitalized that they can’t kick in an extra $8 per paycheck per worker?
But, this brings us to Bernie Sanders, Grover Norquist, and the Culture of No in Congress.
“No”, some people believe, is a vote for the status quo, a vote to keep things just as they are. But that’s not really true, is it? Programs like Social Security and Medicare are constantly evolving in their financial requirements, and “No” simply means that you’re letting the government fall further and further behind the problem.
To Mr. Sanders, all of the above proposals on fixing the programs are nonstarters, for one of two reasons. A, B, C, and E are, to Mr. Sanders, cutbacks in the SS program (he’s right, although they can be finessed so only future recipients have to deal with the cuts, not current seniors) and in Mr. Sanders’ ideology, there should never be any cutbacks in social services, no matter what the circumstances.
Further, to him, (D) and (F) are also verboten, because although they raise taxes (which he normally likes), the brunt of those taxes falls on the middle class (he’s right again). To him, ideologically, all new revenues need to come from the rich.
So, Mr. Sanders is a NO on all of them, while his non-ideological compadres would accept A, B, C, and E (Mr. Obama actually supported the idea of (E)) as long as it was part of a compromise that included (D) and/or (F).
Mr. Norquist, of course, is a simpler matter. He uses his influence to force a NO vote for any proposal which raises taxes, which clearly the Medicare fix and some of the Social Security fixes do. So, the GOP would gladly do ABCE, but if they put D or F into the mix, Mr. Norquist will attack them come election time.
And thus, we have basically been in stasis on Social Security for three decades, due to the culture of NO in Congress, driven by ideologues who put their ideology above compromise.
Frustrating? You bet, and this is why ideologues make terrible leaders, and why I have shed not a single tear that the DNC have screwed Mr. Sanders twice.
You didn’t ask, but here’s MY preferred fix(es):
- Social Security: (a) Raise the eligibility age from 62 to 63. (b) Claw back Social Security payments from retirees who have high incomes from investments, and then (c ) pick up the rest by reinstating the payroll tax for high income individuals, taxing as few of them as is possible, starting with the richest.
- Medicare/Medicaid: Raise the damn tax from 1.45 to 1.85 per employee. There’s just no way around this one. Bite the bullet.
And tell the ideologues to go to hell. Both parties.