Reuters reports: Recession Hurts Medicare and Social Security. The New York Times blares: Recession Drains Social Security and Medicare. And CNN follows suit: Recession Hits Social Security Hard. This spin all comes out of the Social Security and Medicare Boards of Trustees annual report which is signed by Obama Treasury Secretary Tim Geithner, Obama Labor Secretary Hilda Solis, and Obama HHS Secretary Kathleen Sebelius. Their report blames the “economic recession” for growing shortfalls in both the Medicare and Social Security programs. But our entitlement crisis existed long before the current recession, and it will haunt us for decades to come unless something is done soon.
Spending on Social Security and Medicare already totals more than $1 trillion annually and accounts for more than one-third of the federal budget. Recession or no recession, entitlement spending is on track to double by 2050 and tax rates for all Americans would have to double if the programs are not fundamentally reformed.
The Trust Fund Fantasy: The Obama administration’s report admits that Social Security is set to start running annual cash flow deficits by 2016 but claims that “by redeeming trust fund assets” reserves won’t be exhausted until 2037. The Social Security trust fund is a complete fantasy. Since 1939, federal law has required Social Security to “invest” its extra money in Treasury bonds. In other words, the government lends the money to itself. Those funds are then mixed in with all other tax revenue and spent on programs such as education, foreign aid and defense. It’s like a family that borrows money from its retirement fund each year to pay for everyday expenses. When they finally retire, their retirement fund consists of nothing more than paper IOUs.
Medicare Maladies Masked: Medicare’s situation is far worse. In 2008, Medicare’s Hospital Insurance Trust Fund (Medicare part A) already paid out more money than it took in. This year’s report predicts that the Medicare part A trust fund will run dry by 2017. Medicare part B (which covers physicians’ fees and outpatient care) and Medicare part D (drug benefit coverage) already both draw billions from the Treasury’s general fund every year. In 2007 Medicare parts B and D already drew $179 billion from the general fund. By 2017 that figure is expected to reach $353.3 billion. The trustee report doesn’t even see this as a problem. About parts B and D they write: “both [are] projected to remain adequately financed into the indefinite future because current law automatically provides financing each year to meet next year’s expected costs.”
There are good ideas on Capitol Hill about how to fundamentally reform our entitlement system. If the Obama administration is serious about deficit reduction, they should listen.
- “We have not been perfect ourselves,” said Obama administration Ambassador to the U.N. Susan Rice after the United States joined Cuba, China, Saudi Arabia, Russia and Cameroon, on the U.N. Human Rights Council yesterday.
- Sen. John Barrasso (R-WY) confronted EPA administrator Lisa Jackson with an Office of Management and Budget memo warning that an EPA carbon endangerment finding would “have serious economic consequences for regulated entities throughout the U.S. economy, including small businesses and small communities.”
- The Obama administration signaled yesterday that it may be rethinking its promise to release several dozen photos depicting abuse or alleged abuse of detainees held in U.S. custody abroad.
- One out of every four ballots requested by military personnel may have gone uncounted in 2008, according to findings being released at a Senate hearing Wednesday.
- Get the facts on federal tax and spending with Heritage’s 2009 Federal Revenue and Spending Book of Charts released yesterday. A picture is definitely worth a thousand tax increases.