Opinion

Making hard choices about Medicare, Social Security spending

We need to have a strong economy,” says Robert L. Bixby, executive director of the nonpartisan Concord Coalition. “But a strong economy does not mean that we will be able to avoid making hard choices on programs like Medicare, Social Security and other spending priorities.”

Bixby recently met with the Seacoast Media Group editorial board to discuss the importance of policymakers acknowledging the nation’s fiscal challenges and of voters calling for actionable plans to address them. We agree engaging in reform, sooner rather than later, is important to ensure future generations have a better standard of living and a brighter future.

Bixby says the United States is on an unsustainable fiscal track. It is rapidly building up the national debt, which is now equal to 78 percent of the economy (GDP). That is the highest level since the World War II era. Federal budget deficits continue to widen, nearing $1 trillion annually.

A stark reality is also that interest on the debt may soon cost more than all defense spending, and spending on health care and retirement security will continue to eclipse 50 percent of the total federal budget.

Programs like Social Security and Medicare need attention, as the trustees for both programs recently reported. For years, the Social Security and Medicare trustees have warned the programs are on fiscally unsustainable paths.

Social Security has been running a cash deficit since 2010 and its trust funds are now projected to be exhausted by 2035, according to its trustees. And the Medicare trustees said the program’s Hospital Insurance trust fund will likely be exhausted by 2026.

Both programs will experience growing cash deficits as they pay out more than they receive from their respective payroll taxes. The government must also spend more each year just to provide the same level of benefits to more people due to the rising cost of health care and steady flow of retiring baby boomers.

Put plainly, the trustees’ reports reveal tax revenues are not keeping pace with promised spending levels.

The primary drivers of the nation’s unsustainable track are demographics and health care cost growth. Continued inaction by elected leaders to lower health care costs and to put Social Security on a sustainable track will simply result in a higher cost of reform over time.

The U.S. is the world’s largest economy, its debt is still viewed as a safe investment and interest rates on the debt have remained abnormally low. This has created a lack of urgency for the public and policymakers in terms of making needed reforms. But it’s a false sense of security. Even if interest rates remain low, the built-in mismatch between projected spending and revenues still results in an unsustainable path.

It is an odd time for the nation to have increasing debt and deficits because economic growth has been steady and unemployment is quite low. Normally, this would be the time the federal government works to reduce deficits by increasing revenue, reducing spending or some combination of the two.

Unfortunately, the nation’s window for reform may be closing. Recent reports show the economy experiencing a shot in the arm after the 2017 tax code overhaul, but underlying trends have not changed. Long-term forecasts still project economic growth to slow down to less than 2 percent a year. A slowing economy or recession could make it very difficult to make responsible policy changes.

“The reason for the projected drop-off in economic growth is our demographic change,” Bixby says. “Labor force growth is dramatically slower than it used to be, and productivity has been falling as well.”

As a result, he calls for finding ways to expand and improve the workforce. “You need to encourage people to be in the workforce and you need to find ways to increase legal immigration,” Bixby says. “The government has a role in workforce investment and training as well.”

Bixby adds: “What we need is a fiscally responsible economic growth agenda. We can’t expect better economic growth without fiscal responsibility but unless we do more to enhance economic growth it is going to be even more difficult to dig ourselves out of the fiscal hole we are in.”

But Bixby said there is hope, and we agree. There are a wide variety of potential solutions available, but political will is needed to act.

With the 2020 New Hampshire Primary in full swing, voters are engaged and candidates are in the state frequently. The public should call upon candidates to put out plans that grapple with these policy issues, and those plans should provide realistic options to pay for any new investments or programs.

A national conversation that plans for the future and addresses current challenges is needed, and the New Hampshire Primary is a great place to foster that conversation.

 

This editorial originally appeared in Foster’s Daily Democrat on May 1.

 

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