Talk about the ultimate Friday (the 13th) news dump for the White House. The Medicare and Social Security Trustees released their annual report today regarding the solvency and long-term cost outlooks of the two massive entitlement programs (together, they comprise about 35 percent of federal spending, a number set to spike as more and more Baby Boomers enter retirement). Both programs are already in the red and currently pay out more in benefits each year than they collect in taxes, but this latest report brings even worse news regarding there financial outlooks.
According to the trustees report, Medicare’s trust fund will run out of money in 2024, five years earlier than was forecast in last year’s report. And it’s worth noting that the numbers for Medicare are already suspect due to the billions in unrealistic “savings” assumed under the new health law, e.g., assuming Congress will stop voting for the ‘doc fix.’ The Social Security trust fund will run dry in 2036, also earlier than was previously predicated. In the worst shape is the Social Security Disability Insurance program, which the trustees predict will be insolvent by 2018.
Treasury Secretary Tim Geithner, who chairs the trustee’s panel, emphasized the need to act “sooner rather than later” to reform entitlement programs. “We should not wait for the trust funds to be exhausted to make the reforms necessary to protect our current and future retirees,” he said.
If the trust funds are exhausted, immediate benefits cuts would go into effect. Starting in 2024, Medicare could pay about 90 percent of benefits, but that would drop to about 75 percent in 2045. In other words, despite Democratic attempts to savage the Ryan/GOP budget for “ending Medicare as we know it” (starting in 2022), the fact is that “Medicare as we know it” simply won’t be around much longer anyway on it’s current path. Social Security benefits, meanwhile, would receive an immediate 25 percent cut. This is exactly what Paul Ryan is talking about when he stresses to need to address entitlement spending now, on our terms, before cuts are imposed swiftly and indiscriminately.
Republican leaders in both the House and Senate have called for entitlement spending to be considered in negotiations over the debt limit. The Ryan/GOP budget has already caused a stir for daring to do something about Medicare’s unsustainable course, with Democrats insisting that such reforms are an assualt on seniors. If anything, reports like this one ought to help the GOP press its case to wary voters.
UPDATE: Where, exactly, do Democrats stand on entitlements? We know what President Obama has in mind for Medicare (his “panel of experts” that even some Democrats are wary of). We also know how urgently Harry “get-back-to-me-in-20-years” Reid thinks entitlements ought to be addressed. And here’s what House Minority Leader Nancy Pelosi had to say on the matter back in April:
On a conference call with bloggers, Nancy Pelosi urged Dems to fashion their response to Paul Ryan’s Medicare proposals on the Democratic Party’s successful defeat of Social Security privatization, and made a critical point: Dems succeeded in 2005 because they did not take the GOP’s bait by offering their own plan to “fix” Social Security.
Pelosi — who is widely viewed as the person most responsible for ensuring that Dems drew a hard line against Bush’s privatization proposals — said that so doing would have persuaded people that there must have been something wrong with Social Security that needed fixing. She suggested that Dems should keep that message in mind as they prepare to do battle over Ryan’s Medicare proposals.
“We got criticized for it, but it was the most important thing,” Pelosi said. “We couldn’t have our own proposal on Social Security because it would confuse the public.”
Pelosi said that so doing would have meant Dems were “conceding there must be some big problem.” She characterized the Dem message at the time as follows: “We have a proposal on the table: It’s called `Social Security.’ The President has something on the table: It’s called `privatization.’”
Maybe Democrats just don’t consider Medicare’s looming insolvency to be “some big problem.” Or maybe their plan is to simply wait it out until 2024 and have a 10 percent across-the-board cut imposed on seniors. Either way, they should at least have the guts to admit where they stand.
UPDATE II: Republicans weigh in on the report:
House Speaker John Boehner (R., Ohio):
The trustees’ report makes it clear that if we do nothing, Medicare will not be able to pay promised benefits to American seniors – and sooner than we thought. That is the real challenge our nation faces. It’s time for the grown-ups in the room to stand and be counted. We have laid out a plan to address the threat of Medicare insolvency. We’re still waiting to see one from President Obama and the Democrats who run Washington.
Senate Budget Committee chairman Jeff Sessions (R., Ala.):
Today’s news that Social Security and Medicare will become insolvent even sooner than expected is a sobering wake up call and makes clear we must take action now to avoid catastrophe. Washington has no excuse. We have known for years this was coming. This report underscores the fact that Washington’s big spending ways threaten to betray America’s seniors. The good news is, we need not go down this road. If we make honest and responsible choices now, we can shore up these programs and secure them for the future. I was not elected to spend away seniors’ retirement security, and I intend to fight to place these programs on a solid financial footing so that we may fulfill our nation’s obligations.
Sen. Marco Rubio (R., Fla.):
Yesterday, sitting across from the President, I told him that we have to act now to reform Medicare and Social Security if we are to save these vital programs for future generations, my generation and current retirees like my mother. Today’s Social Security and Medicare Trustees Report confirms the urgency required and the basic reality that doing nothing will lead to benefit cuts and the bankruptcy of these programs and our nation. In light of this report, Democrats should finally put forth their own ideas. At the same time, as I told the President yesterday, this crisis demands his leadership. Let’s do what each generation before us has done, put aside the political demagoguery, and meet the challenge of our time by saving these programs for my mom, my generation and my children’s generation.