The trustees of Social Security and Medicare have given us their annual scary lecture on the approaching bankruptcy of the two programs that provide health and security to seniors. Once again, as so many times in the past, they tell us the programs are in trouble and cannot be sustained without major changes. And once again, few are paying any attention.
Indeed, to the contrary, the air is full of proposals for new entitlements, like Medicare for All and free college tuition, to be paid for by taxing the super-rich or by printing more money. There is even a ludicrous, newly fashionable notion, called modern monetary theory, that tells us there really is such a thing as a free lunch, and that we can go as deep into debt as we please with no adverse consequences.
Apathy has become the national response to warnings from the Congressional Budget Office and safety net trustees. But the numbers point to serious consequences.
At its current rate of spending, Medicare will go bankrupt — or be bailed out on the backs of future generations — in 2026. Social Security will exhaust its reserves and its beneficiaries will face cuts of 20 percent or more by 2035.
Payroll deductions cover only half of Medicare’s annual costs, and spending is projected to rise faster than national income for the foreseeable future. At some point the whole program faces collapse.
Meanwhile, Social Security has accumulated $14 trillion in unfunded obligations it has promised to pay over the next 75 years.
All Americans should give serious thought to how their lives would change if the government fails to meet its safety net obligations, or alternatively if they had to give up most of the services provided by the federal government, including a robust defense budget, in order to fund entitlements and service the growing national debt.
What would happen to the South Carolina economy if Social Security and Medicare dried up? Their payments provide about 5 percent of the state’s annual economic product and support about one in five residents.
Suppose that payment stream was cut in half. The effect would be proportionally larger than the 2008 Great Recession, when the state economy fell less than 2 percent.
The state budget would take a major hit because many of the seniors now receiving Social Security and Medicare benefits would likely end up needing Medicaid, potentially doubling its rolls. Blind and disabled recipients would need a new source of support, putting a major stress on private charities and the state budget. State taxes would have to rise.
At the national level, the choices are to reach a political agreement that stabilizes entitlements or cut other federal spending dramatically.
Democratic and Republican leaders have failed to address this looming crisis for years. But what cannot go on forever will not go on forever, and the sooner the nation comes to grips with the necessary changes and sacrifices needed to stabilize the federal budget, the easier it will be to phase in the needed changes.
Waiting another decade to act would be to court real disaster.