This week on Facing the Future, we got a thorough briefing on the latest Social Security and Medicare Trustees’ Report from Dr. Charles Blahous, a former Public Trustee of both programs and now Senior Research Strategist at the Mercatus Center at George Mason University and Visiting Fellow at the Hoover Institution. Concord Coalition Chief Economist Steve Robinson, a former Senior Policy Advisor at the Social Security Administration, joined the conversation.
With Congress considering major plans for new spending of up to $3.5 trillion over the next 10 years, and trying to figure out how to pay for it all, the annual report of Social Security and Medicare trustees was released on August 31. It was a timely reminder that Congress still hasn't figured out how to pay for some of the big programs we already have.
Together, Social Security and Medicare comprise nearly 40 percent of federal spending and their payroll taxes account for about 35 percent of federal revenues. Social Security serves about 65 million Americans while 63 million qualify for Medicare. In short, the future of these programs will have a massive effect on the budget, the economy, and millions of individual households, whether as beneficiaries or taxpayers.
Blahous described the 2021 Trustees' Reports as “alarming.”
“To say that they are concerning reports understates it. If we didn’t have a dysfunctional political climate, the publication of a report like this would immediately cause lawmakers to snap into action and say ‘what do we have to do to preserve these programs,’ and of course we’re not seeing that,’ he said.
Blahous observed that, “If Congress were willing to cut benefits immediately to get the system back in balance, they would have to make those immediate cuts for new claims equal 25 percent. How likely is it that lawmakers would be willing to cut benefits 25 percent the next day? It’s not going to happen. Any changes they do would be phased in gradually.”
That delay, however, would raise the ultimate cost of the changes needed to stabilize the system. A major concern expressed by both Blahous and Robinson is that those costs could become so great that they would overwhelm the basic “self-financing” premise of Social Security, making it more of a welfare program largely funded by general revenues.
As Robinson put it, “The fear is that when we get to 2032 or 2033 and trust fund insolvency is looming around the corner, the path of least resistance is to say ‘we’ll just write some IOUs and stuff them in the trust fund and call it general revenue transfer.” That’s going to be the political solution but in fact it’s certainly not a real solution from an economic or policy perspective.”
Blahous added, “We shouldn’t have a fundamental change happening to Social Security simply because the public was misdirected as to the change taking place.”
Hear more on Facing the Future. I host the program each week on WKXL, NHTalkRadio.com (N.H.), and it is also available via podcast. Join me and my guests as we discuss issues relating to national fiscal policy with budget experts, industry leaders, and elected officials. Past broadcasts are available here. You can subscribe to the podcast on Spotify, Pandora, iTunes, Google Podcasts, Stitcher, or with an RSS feed. Follow Facing the Future on Facebook, and watch videos from past episodes on The Concord Coalition YouTube channel.