Of the five Republicans who took the stage Wednesday night for the latest GOP presidential debate, only two — Nikki Haley and Chris Christie — showed that they were serious, and honest, about fixing Social Security and Medicare.
Even so, the comments made by Haley — the former South Carolina governor and United Nations ambassador — were misleading.
“Any candidate that tells you that they’re not going to take on entitlements is not being serious,” she said. She’s right. But she went on to say: “Social Security will go bankrupt in 10 years. Medicare will go bankrupt in eight.” On this point, she’s wrong.
Social Security has big problems, but “going bankrupt” isn’t an accurate description of them. Here’s the deal: Social Security is paying out more than it is taking in. To make up the difference — and keep its commitment to the 67 million Americans who receive monthly benefits — the trustees of the Social Security system have been dipping into what is called its trust fund, which is essentially a vast cash reserve. The trust fund, which held about $2.7 trillion at the end of last year, is scheduled to be used up by 2033.
See: Social Security in peril? Mitt Romney vows ‘promises will be kept’ in response to debt-commission concerns.
What happens then? Social Security won’t be “bankrupt” like Haley says. But it will be able to pay out only as much as it takes in from the payroll taxes that you and I and our employers pay into the system. Unfortunately, that’s projected to only be enough to cover 80 cents on the dollar of projected benefits.
So fasten your seatbelts. Unless something is done, Social Security recipients will get a 20% cut. This will be painful and inflict massive hardship upon millions of people. But the program won’t be bankrupt.
It’s a similar story for Medicare, but with a much shorter time frame. The program’s trustees say that the Hospital Insurance Trust Fund will be able to pay 100% of benefits until 2031. At that point, as for Social Security, that reserve will also become depleted and future payments would be cut, according to current projections, by some 11%. Again: This would mean massive hardship for millions. And Haley is right that our politicians have to do something.
The problem is that our politicians — from both parties — have let years go by, watching these deadlines creep ever closer, without taking action.
One reason politicians have been diddling around for years is because they’re afraid to do what is sometimes necessary, and that is to inflict pain upon the American people. Politicians don’t do that. Not if they want to get re-elected.
But 20% cuts to Social Security and 11% to Medicare? Pain is headed our way regardless of whether they act or not. Better to bite the bullet now.
Here are three options — and again, they involve sacrifices:
Raising the retirement age. I credit Haley, along with former New Jersey Gov. Chris Christie, for saying that they favor this. The other three candidates — Florida Gov. Ron DeSantis, South Carolina Sen. Tim Scott and businessman Vivek Ramaswamy — would not commit to this option. The current GOP front-runner, former President Donald Trump, has also shied away from hiking the retirement age.
Haley and Christie’s proposal would affect younger voters who are still decades away from retirement. Although neither said this Wednesday night, it would probably involve a gradual age hike — say, raising the retirement age by one month per year.
Means testing. Christie thinks wealthy Americans — he singled out multibillionaire Warren Buffett — shouldn’t get Social Security benefits. He didn’t say what the limits should be, and I suspect that trying to figure those limits out — much less agree on them — would be messy. Besides, the next idea, which Buffett supports, is better.
Lifting the tax cap. Right now, tycoons like Buffett pay Social Security taxes on the first $160,200 of their earnings, a number that goes up each year based on inflation. Buffett and others propose ditching this limit, an idea some proponents say would generate as much as $150 billion a year for Social Security.
But this is also a tax hike. Good luck finding any Republican who would go along with it.