Neither of the two men most likely to be elected president in November has anything that could properly be described as a workable plan for addressing the approaching insolvency of America's two largest entitlement programs.
This week's news from the Social Security and Medicare trustees ought to underscore just how foolish that is. On Monday, annual reports from the officials charged with running the two old-age entitlement programs confirmed once again that the clock is ticking for both: Social Security is expected to hit insolvency in 2035, while the portion of Medicare that pays for hospital visits and other medical care will be insolvent by 2036.
Even though both projected insolvency dates have slightly improved since last year—when the trustees expected them to run out of cash reserves by 2034 and 2031, respectively—the seriousness of the problem cannot be ignored. When Social Security hits insolvency, beneficiaries will face an automatic 21 percent cut in benefits. The insolvency of Medicare's Hospital Insurance Trust Fund will trigger an automatic 11 percent cut, which would "likely lead to significant disruptions in health care services for older individuals and those with disabilities," according to the Committee for a Responsible Federal Budget.
It's worth underlining that point. Those benefit cuts are not the result of future choices that might be made by Congress and the president—they are baked into the current status quo of the two programs. Without policy changes, they will eventually become a reality.
That's a reality that neither President Joe Biden nor former President Donald Trump seem willing to acknowledge. Both leading contenders for the White House have pledged to block potential changes to Social Security—effectively a promise to keep the entitlement trains running full-speed down a dead-end track.
The Biden administration has denounced a plan drafted by some Republican lawmakers that would raise the retirement age to 69—a modest change, and one that is hardly sufficient to avert Social Security's insolvency. Trump, meanwhile, suggested in March that he was open to "cutting" and making other changes to entitlement programs—then immediately walked back those remarks. During this year's Republican primary, the Trump campaign ran ads targeting Florida Gov. Ron DeSantis and former South Carolina Gov. Nikki Haley for their willingness to at least talk about the need for entitlement reform.
This should be disqualifying on both sides. The American people deserve to know how the next president would approach this problem. We don't need perfect solutions, but the utter lack of any plan demonstrates an (admittedly unsurprising) level of unseriousness.
"Many political leaders in both parties, from the top on down, would rather demagogue the issue than actually fix it," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, in a statement. "As we head into peak campaign season, it is our job as Americans and the voting public to ensure that we demand President Biden and President Trump present us with a realistic, detailed plan to avert trust fund insolvency. And they need to work with Congress to implement a plan. Time is running out."
The best approach to Social Security would involve allowing American workers more freedom to plan for their own retirements—rather than raiding their paychecks to cover benefits for retirees, who in many cases are wealthier than the workers funding their benefits. Workers should be allowed to opt out of Social Security as part of any future changes.
Medicare's insolvency is a more complicated problem, but one that ought to be addressed first by trying to reduce the cost of health care rather than by raising taxes on working Americans.
Still, insolvency is only a part of the problem presented by the two creaking entitlement schemes. Both Social Security and Medicare are projected to run deficits every year between now and 2098 (the end of the trustees' reports' 75-year budget window), and those deficits are the primary driver of the federal government's increasingly unable fiscal situation. Even if the two programs weren't expected to run out of cash in the mid-2030s, putting them on a more stable fiscal trajectory would be important for long-term economic growth. Refusing to fix the spending side of the equation likely ensures devastating tax increases in the next decade and beyond.
The total unfunded liability for Social Security over the 75-year budget window totals $25.2 trillion, note Cato Institute budget analyst Romina Boccia and Ivane Nachkebia in The Debt Dispatch Substack newsletter. To close that gap with taxes alone, Congress would have to increase the payroll tax rate from 12.4 percent to 17.5 percent—equal to raising taxes by $2,450 annually on the median worker.
"Congress should tackle these welfare programs now before they become a bigger drag on people's livelihoods from higher taxes and economic growth from more government spending," Vance Ginn, a former White House economic advisor during the Trump administration, posted on X. "It won't be politically easy but the stakes are too high and the government failures getting us to this point are excessive and much be corrected with more free-market capitalism over what has been a path to big-government socialism or we risk a more dire situation."
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