While at the vet office this morning having our cat’s nails trimmed, l picked up the local paper and read the front page national news story: “New report warns social security and Medicare could run out of money even earlier than feared.” I’m of course, as you are, well aware of the media’s capacity for alarmist reporting. Anyway, what a lousy way to start off a Saturday meant for more pleasant things like doing some gardening or watching the Red-Sox-Yankee volatile match-up.
Still, this matter of our nation’s financial ills, how it all happened, and what we might do to preempt its becoming a contagion is serious business that we can’t simply ignore without putting ourselves at considerable risk for a precarious future of escalating expenses concurrent with diminishing income. Today’s news story only underscores our economic cancer. We may not be able to even sustain two enormously successful entitlement programs: Social Security and Medicare, both of which are now projected to be depleted by 2036, or a year earlier than anticipated.
As to Medicare, representative Paul Ryan (R-Wisconsin) has unleashed a storm of controversy, proposing to slash 5.8 trillion in federal spending over the next decade. Presently, and this is real sticker shock, our federal deficit is 14.3 trillion! Ryan’s linchpins focus on revamping Medicare and Social Security. Medicare recipients would receive vouchers to help pay their medical costs. It’s conceivable that Medicare patients might ultimately fork-out 68% of their costs, versus 25% at present.
Right now, cutting back on entitlements is a brave thing to do, fraught with controversy, and perhaps so frightening to public constituencies that Republicans may have assured Obama’s second term in a landslide. Almost by way of hypocrisy, even the Tea Party, whose focus is reducing government taxes through reduced spending, bristles at the idea of cutting back on Medicare and Social Security, a recent poll indicating that 70% of them are opposed to such measures.
As it stands right now, we have several unpleasant options:
Increase payroll taxes for both programs and remove the current salary cap for Social Security, presently set at $106,900. Republicans are adamantly opposed. Democrats also are reluctant, except for the President’s proposal to levy a 2% increase on incomes above $250,000. One problem here: in running for his first term, Obama pledged he wouldn’t raise taxes on those making less than $250,000.
Cut benefits. In order to keep these programs solvent, some have said that cutbacks in Social Security, for example, need to be made in the 15% range. This is doubtless DOA.
Ironically, the Republicans (and I write as an Independent) are responsible for a good deal of the budget debacle. House Speaker John Boehner has recently said that “if the President begins the discussion by saying we must increase taxes on the American people–as his budget does–my response will be clear: tax increases are unacceptable and are a nonstarter.” (The President is actually proposing an increase on just 2% of wage earners.)
Laurence Mitchell of the Economic Policy Institute, hits the nail on the head, commenting that “In a way, all of this debate, all of this bravery is largely about paying for the Bush tax cuts.” The facts are that keeping the George W. Bush cuts through 2018 will cost 4.4 trillion in revenue with its reduction of the top marginal rate from 39.6 to 35%.
Of course if the Congress does nothing about revenue, the Bush cuts will expire at the end of 2012, resulting in 75% of the deficit problem being erased over the next five years, according to David Leonard (“Do-Nothing Congress as a Cure.” New York Times, Apr. 13, 2011). Hey, that’s not a bad thing!
I personally think we should all–not just the wealthy–pay a fair share in taxes, and I don’t like the Obama political game of playing one economic class against another. As I pointed out in an earlier entry (April 18), 40% of Americans pay no federal tax at all, apart from payroll taxes for Social Security and Medicare.
There’s no free lunch! We all pay our share or we all sink together.