Editorial: There are solutions
The worsening financial condition of Medicare and Social Security must prompt Congress and President Obama to mend these vital safety nets.
The worsening financial condition of Medicare and Social Security must prompt Congress and President Obama to mend these vital safety nets.
News about the entitlement programs is bad, but hardly a surprise. Social Security is now expected to be unable to pay retirees full benefits by 2037, four years earlier than the government projected just a year ago.
Medicare is in even worse shape. The portion of the trust fund that pays hospitals for seniors' care is expected to run out of money in 2017, two years sooner than was forecast last year.
Both programs are losing money more rapidly due to the recession. With so many workers losing their jobs, fewer people are contributing payroll taxes to Medicare and Social Security. Rising health-care costs also are draining Medicare's trust funds.
But that's no excuse for Congress. Lawmakers have known for years that the entitlement programs are in trouble. The latest report on their precarious condition is just a more urgent warning that Washington can't keep kicking the problem down the road.
Task forces have studied the problem, but the recommendations just gather dust on shelves. A solution keeps getting postponed because the options are politically unpopular. Congress can either raise taxes, or cut benefits, or enact a combination of both.
The Obama administration says it would take an increase of 2 percentage points in payroll taxes, from 12.4 percent to 14.4 percent, to fill in the gap. Those taxes are split equally between employer and employee. In a recession, such a significant tax increase is an especially heavy lift.
Or the shortfall could be made up by cutting benefits 13 percent. That's not an attractive option, either, especially since the stock-market and real-estate plunges have shrunk retirees' nest eggs. (Small wonder you don't hear talk these days about investing a portion of Social Security in personal stock-market accounts.)
But the administration and Congress must summon the political will to tackle the problem. The longer Washington waits, the more drastic the eventual fix will be.
Four years ago, this Editorial Board proposed a five-part plan for fixing Social Security after consulting with experts. It involved a mix of tax increases and benefit trims; for example, raising the payroll tax cap from the current $106,800 to $140,000 or more over 25 years. (Obama proposed a similar move during the presidential campaign.)
Switching to a new formula for calculating cost-of-living increases would slow the growth by about 0.2 percent per year. Dedicating a limited portion of the estate tax to the trust fund would add revenue.
The options are known and have been debated thoroughly. What's needed is the political courage to save the programs.
Social Security and Medicare help to prevent millions of seniors from falling into poverty in retirement. The programs must be fixed, sooner rather than later.
