“President Biden refuses to consider any reforms, and so do many Republicans. But that won’t save the program; it’ll doom it.”
This may not be the best time – right after both parties have negotiated cuts in order to raise the nation’s debt ceiling. But if not now, when? It’s time for Washington to begin to level with the American people. Your retirement programs are in trouble.
If your car starts acting up, it isn’t going to fix itself. And if you are running a nation with an aging population and a Social Security system that relies on today’s dwindling workers to support today’s burgeoning retirees, you can’t just sit around, refuse to do anything and hope it gets better.
And yet, doing nothing seems to be the popular choice right now.
“I will not cut a single Social Security or Medicare benefit,” President Biden told a crowd in Florida in February, according to the Associated Press. “In fact, I’m going to extend the Medicare trust fund for at least two decades.”
All you have to know about the Republican position is to remember how many of them reacted during the president’s state of the union address when he accused them of wanting to cut the programs.
Not all them. Utah Sen. Mitt Romney has proposed setting up separate committees to study the programs and the federal highway trust funds. He would mandate that the committees find ways to keep the programs solvent long term. For that, he has been accused of wanting to dismantle Social Security and Medicare.
Utah’s senior senator, Mike Lee, wants to index the retirement age to life expectancy and allow people to invest some of their Social Security contributions in private accounts. This, too, attracts howls.
But it’s what the Swedes did, in part.
Norberg, and other Swedes, are in a position of moral authority when it comes to this subject. That’s because the nation once famous for its socialist style of democracy confronted its own Social Security crisis head-on, in the 1990s, and fixed it.
They fixed it so it can’t run a deficit. The program reduces benefits when the economy contracts, and increases them when it expands. And everyone can choose from among five separate funds in which to invest 2.3% of their wages per year. This has withstood three decades of market volatility with an average return of about 10%, Norberg wrote.
He described the Swedish process as one of politicians choosing not to deceive voters. They held “an adult conversation about costs, benefits and what was possible, instead of merely rehearsing slogans …” What a concept.
“The old pay-as-you-go pension system had promised too much,” he wrote. “With fewer births and longer lives, projections showed the system would be insolvent a decade later.”
In March, the trustees of Social Security issued an annual report that the trust fund millions of Americans rely on to at least help with retirement will be depleted in 2034. The funds for old age retirement and survivor benefits and for disability would be able to fund only 80% of current benefits at that time, unless something changes.
Medicare’s hospital insurance trust fund is expected to be insolvent by 2031.
Writing for the non-profit Tax Foundation, William McBride praised the cuts in the debt-ceiling deal. But he warned that lawmakers haven’t done anything yet.
“The challenge is that lawmakers in both parties have been unwilling to address the roughly two-thirds of the federal budget that is mandatory spending, which is also the fastest growing part of the budget along with interest payments on the debt,” he said. Social Security and Medicare are mandatory programs that grow without congressional approval.
“As a meaningful next step, lawmakers should convene a fiscal commission to grapple with long-term budgetary challenges…”
The recent debt ceiling negotiations may not have been the time to tackle something as big as Social Security or Medicare reform. But Washington can’t afford to wait until the last minute with these, as it did with the debt ceiling.
The first step is to do something — level with people in an adult conversation. Even if they don’t want to hear it, they need to know their benefits are in jeopardy unless something changes. Either taxes have to rise, the retirement age has to increase, the Social Security tax cap must be lifted or a combination of these should be instituted to keep things going.
This is America’s Swedish moment. Will we respond?