Thursday, April 14, 2005

Social Security and Medicare - uncontrolled entitlements

It's reform Thursday at WILLisms and his focus today is on entitlements.

Social Security and Medicare together eat up such a large portion of the budget, it is nearly impossible to achieve true fiscal responsibility, even by lowering spending on other programs. Entitlement spending is the bulk of the budget, and if Democrats and Republicans alike are truly concerned about deficits, they will reform Social Security, one of the largest entitlements, sooner rather than later.

In the future, without reform, Social Security spending as a share of the overall budget will grow, making balanced budgets exceedingly difficult and forcing painful choices, choices that we can avoid with reform.

Check out the graph and his series of Thursday reform posts.


Bill Lama said...

Commenting in the LA Times last week, Len Burman (Urban Institute, Tax Policy Center) says "if you think taxes are a pain now, well you ain't seen nothin' yet." The Congressional Budget Office projects that gov't spending will be 1/3 of US GDP by 2050, not counting interest on the debt. That is double the 2004 percent of GDP and will require doubling all taxes. Scary!!!

Ralph said...

You need to stop supporting the LAT. The Breeze covers everything you need and they actually report about local news.

Mike said...

Hey Ralph,

I agree that Soc Sec needs a fix. Everyone does. The argument right now is about stopping the drastic change Bush has proposed in favor of something less radical.

Barnie Frank (whom I am sure is not popular here) has pointed out very accurately that in 1998, Democrats suggested placing the trust fund into an index fund, but one that would be kept in Social Security's domain. The GOP shot it down.

To do it the President's way, private accounts, is really a de facto tax cut (it returns the money to the tax-payer). The trouble though is by doing so, you lose the insurance aspect of the program...pooled risk.

The idea of Social Security being an "entitlement" is disingenuous. It's retirement income insurance, premiums being paid and by workers, benefits received by retirees and survivors.

The debate first needs to be, "do we want the insurance or not?" If the answer is "no", then the President's plan is a go. If the answer is "yes" (and most polls suggest this is very much the case), then the President, and the Congress need to respect the will of the people and find other measures.

Bush needs to remember, a re-election win does not mean the American people will agree with everything he does for the next 3 3/4 years. Sometimes you've gotta give to get, and your guy don't like to give, unless its a serving of warm crow.

Personally, an idea I would like to advocate is a full tax-credit for every dollar in benefits waived. That would make the $1200 a month worth $14.4K in tax write-offs...a valuable benefit to the wealthy for whom the income would be insignificant and an additional burden come April 15.


Ralph said...

What is so radical about giving actual ownership of a small part of the funds to the recipients. You may call Social Security insurance, but insurance relies on actual assetts to offset the liability - not IOU's from the government. Until we change the structure it is and will remain an entitlement. Also everyone is benefitted if the funds are invested and bring a return. Benefits are higher and government liabilities are reduced. Why son't Democrats step forward with an alternative rather than voice syncing Nancy Reagan?