I’m glad that the Social Security and Medicare Trustees have started reporting the costs of fixing those programs’ finances permanently. They’ve been consistently releasing those figures since 2004, and this year, the costs are estimated at $102 trillion, up from about $90 trillion last year — an increase of $12 trillion in one year.
But government apologists usually hammer me when I cite those official numbers: Who cares about costs in the distant future, fraught as they are with so much uncertainty, they ask.
Let’s consider their preferred time horizon of the next 75 years. We learned this week that the 75‐year financial shortfalls of Social Security and Medicare are just $42.8 trillion in present discounted value (not counting the value of securities in their trust funds).
“Just $42.8 trillion?” Is there anyone around whose eyes wouldn’t grow as large as saucers when contemplating such a figure?
Last year, the official 75‐year estimate of Social Security and Medicare’s scheduled obligations was $40.9 trillion. So the cost grew during one year by $1.9 trillion.
This is the deficit policymakers should be focusing upon rather than the $400 billion federal deficit that’s bandied about by beltway budget mavens. The latter only considers the federal government’s cash shortfall during the current year. Much larger future shortfalls under current Social Security and Medicare policies — which are considerably more inflexible — are essentially ignored.
According to most observers, the Bush administration’s entitlement reform proposals are DOA in Congress this year. Nothing will happen until the next president and a new Congress have been elected.
Based on the current growth rate of entitlement costs — $2 trillion per year under a 75‐year time horizon and $12 trillion per year if measured on a permanent basis — wouldn’t it be smarter not to wait for next year’s lawmakers to show up? Given the massive electoral advantages incumbents enjoy, most of them will probably be the same people, anyway.
Why not lock them all up in a room this year — let’s say next Thursday — until they can come to agreement on how to balance entitlement program finances, even if only for the next 75 years?
The 1983 reforms restored the balance between Social Security’s costs and revenues through 2058, but the program’s 75‐year budget is back in the red as of today. And as the years pass, the 75‐year budget window will shift ahead to include financial shortfalls in the years past 2082, which are not counted today. As more and more of those out‐year shortfalls were included in the calculations, the 75‐year financial imbalance would again become extremely large.
A savings of $2 trillion per year over the next few years is nothing to sneeze at. So enacting some sort of entitlement reform immediately appears more sensible than waiting another year to have worse choices under a new president and essentially the same old Congress.