by Mark Silva
Train wrecks ahead:
The Social Security trust fund will run out of assets in 2041, the program's trustees said today, repeating an earlier projection. And spending on Medicare will reach a legal limit much sooner -- by 2014 -- requiring the next president to propose changes to avert the first train wreck.
"As the baby boom generation moves into retirement, these programs face progressively larger financial challenges," Treasury Secretary Henry Paulson, one of the trustees, said at a press conference today. "The Medicare program poses a far greater financial challenge than Social Security."
Social Security will also start paying out more in benefits than is collected in payroll taxes by 2017, according to the report of the Social Security trustees released today. In order to keep the program on track, Paulson said, the payroll tax rate will have to be raised by 3.2 percentage points or benefits cut.
“"This report confirms the need for action,’’ Paulson said. “The sooner we take action to strengthen Social Security's financial footing, the less drastic the needed reforms will be, and the fairer reforms will be to future generations.’’
The reports brought quick commentary from the White House as well as the presidential campaign trail.
“The trustees report yet again triggers a funding warning in Medicare – signaling the program is in serious straits as it faces a $36 trillion unfunded obligation,’’ saidJim Nussle, director of the White House Office of Management and Budget – pointing to proposals the president has made to curtail spending.
“In each of the last three years, the president has proposed responsible steps to slow the growth rate in Medicare – offering a more aggressive proposal each year to reflect the growing magnitude of the problem,’’ Nussle said. “It is disappointing that congressional Democrats have once again chosen to ignore entitlements in their budgets. Inaction is irresponsible. But there is still an opportunity during budget negotiations for the House and Senate to help prevent this oncoming fiscal train wreck.’’
President Bush’s proposed budget for fiscal year 2009 proposes cutting the growth in Medicare spending from a rate of 7.2 percent to 5 percent over five years.
Presidential candidates are not stepping up as forcefully as they should, according to Isabel Sawhill, a Brookings Institution scholar.
“The latest report from the trustees shows once again that the aging of the population along with rising health care costs per capita threaten to bankrupt the country if nothing is done,’’ Sawhill said today. “Yet, none of the presidential candidates has been honest with the American public about the magnitude of the challenge and the importance of dealing with it sooner rather than later.”
Sen. Hillary Clinton (D-N.Y.) today was focusing on Arizona Republican Sen. John McCain’s talk of opening Social Security accounts to personal savings accounts – a plan that the Bush administration has promoted without success.
“Sen. McCain said something stunning the other day,’’ Clinton said today. “He pledged to continue President Bush's attempts to privatize Social Security. He said, and I quote, ‘as part of Social Security reform, I believe that private savings accounts are a part of it, along the lines that President Bush proposed.’ ‘
“Social Security privatization is a bad idea whose time has come and gone,’’ Clinton said.
Sen. Barack Obama (D-Ill.) said this today:
“Today’s report should give Americans confidence that we can keep Social Security strong for future generations if we come together and address its real but manageable long-term cash flow issue.
“But the report also shows the cost of Washington’s failure to overcome the special interests and pass health care reform that expands coverage and lower costs, which would keep Medicare strong and affordable for America’s seniors. As president, I will reduce costs in the Medicare program by enacting reforms to lower the price of prescription drugs, ending the subsidies for private insurers in the Medicare Advantage program and focusing resources on prevention and effective chronic disease management.
“I’ll also bring Democrats and Republicans together to provide every single American with affordable, available health care that reduces health care costs by $2,500 per family. By investing in proven measures to improve the health of all Americans and reduce health care cost across the economy, we can ensure that the Medicare program remains strong for future generations."
Yet Clinton and Obama already are members of the Democratic-led Senate.
House Republican Leader John Boehner (T-Ohio) suggested the Congress has ignored repeated warnings about the crisis spelled out in the trustees’ reports.
“The need to reform Medicare and Social Security to preserve the programs’ benefits for future generations of American seniors is clear,’’ Boehner said. “ The Social Security and Medicare Trustees have repeatedly warned Congress and the American people that the programs must be reformed or future benefits will be threatened, and today’s report is no exception. We face a demographic tsunami of nearly 80 million retiring Baby Boomers and rising healthcare costs.
“Congress can’t sit idly by while these programs go bankrupt,’’ he said. “We must act now.’’