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Social Security

Chicago Hope? Bipartisan Cowardice, Biden’s Bizarre Challenge

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Listen to “Chicago Hope? Bipartisan Cowardice, Biden’s Bizarre Challenge” on Spreaker.

Join Jim and Greg as they welcome a shred of hope that Chicago voters might elect a new mayor who seems much more serious about crime – but they are not holding their breath. They also break down some of the biggest moments from President Biden’s State of the Union on Tuesday – from bipartisan cowardice on entitlements, to Biden’s delusions on energy, and more. Finally, they break down Biden’s stunningly brief and vague comments on China and his bizarre, angry challenge to name one world leader who would want to trade places with Xi Xinping. Short answer? A lot of them.

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Simple Solution to Save Medicare, Social Security

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Social Security and Medicare are on the path to insolvency sooner than previously thought, and Rep. Dave Brat, R-Va., is frustrated that Congress won’t act to stave off fiscal disaster when the solution seems obvious to him.

On Tuesday, the government announced that on their present courses, Medicare will become insolvent in 2026 and Social Security faces the same fate in 2034.  The Medicare projection moves the insolvency date three year’s closer than the government estimated just last year.

And it’s not just the warnings of impending fiscal chaos.  Brat says mandatory entitlement spending once consumed 25 percent of the budget and 75 percent was spent on defense and other domestic spending.  Now, he says entitlements gobble up 75 percent of the budget and it already has some people feeling the pain, since far less money is available for other priorities.

“People are starting to feel that and states are starting to feel that and localities, because the same money is not getting down to them,” said Brat, always ready with an example of the red ink engulfing the U.S. to the tune of $21 trillion and another $100 trillion in unfunded liabilities.

“In ten years or so, they’re saying the interest payment alone on the debt will be bigger than the defense budget,” said Brat.

He’s also keeping a close eye on Wall Street.

“The bond market is the ultimate arbiter here.  They will send the signal on what is too much debt.  The unfunded liabilities fit into that indirectly.  They put (on) pressure.  You’re getting a lot of new concerns from the market itself.

“That is unfortunately what it will take.  As soon as the bond market has a hiccup, then everyone’s going to get way more responsive,” said Brat.

The trillions of dollars in debt the nation faces is hard for anyone to fully comprehend, but Brat says there is a simple approach to restoring solid footing to Medicare and Social Security.

He says those programs began when the life expectancy in the U.S. was 65, so the government made money on the people who aid into the system but didn’t reach retirement age and had enough resources to provide assistance for those that lived longer.

That has changed.

“The programs still kick in at 65 but the average death age is now 83.  So you don’t have to be a rocket scientist to figure out what the answer is.  But that’s politically explosive to rearrange these programs and reform them so that has to be bipartisan and it has to be done within an election cycle,” said Brat.

Brat suspects the Democrats will continue to argue that tax hikes on “the rich” will shore up the systems for the long haul.  Brat says that would barely make a dent.

“If I told you how much you would have to raise taxes to make these programs solvent, you wouldn’t believe it.  It’s through the roof.  Those aren’t politically palatable and if you put those tax increases in, you’d bring the economy to a halt.  You’d have zero growth or recession immediately,” said Brat.

“The Democrats don’t like spinach.  They’re more on the spending side.  They’re not trying to trim and save money over the long run.  They want to expand all of government,” said Brat.

Democrats strongly dispute the diagnosis for the encroaching insolvency.  Many politicians on the left and some policy experts contend the $1.5 trillion Republican tax cuts are the driving force behind the revised estimates on Medicare.

Brat pushes back strongly against that analysis.

“That’s just pure politics.  The tax cuts are $150 billion a year (over ten years) and if you grow at three percent they’re paid for.  The left said you’ll never get three percent and we’re at three percent,” said Brat.

He says reckless spending like the Democrats forced into the recent omnibus that also boosted military spending is how we got to this point.

“What they won’t tell you is that to get nine Democrat Senate votes at the end of the budget debate, we had to plus up the budget $400 billion – the tax cuts were $150 billion – to go sign a budget,” said Brat.

Brat says Congress must get it’s act together but shows no interest in doing so.

“No. Nothing. No response.  That’s what’s stunning.  People have internalized the politics and realized what it would take to achieve that change,” said Brat.  “We should be dealing with it right now if we’re rational and foresighted.”

He says the inaction leaves an unfair burden on upcoming generations.

“The only substantial power group that doesn’t have a lobbyist up here is the kids, and if you’re not represented, you don’t get attention,” said Brat

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Ellison’s Exit, Entitlements Implode & America Yawns, Obama’s New Iran Lie

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Jim Geraghty of National Review and Greg Corombos of Radio America welcome the news that outspoken liberal Rep. Keith Ellison is leaving the House of Representatives to run for statewide office in Minnesota, a venture they sincerely hope ends in failure.  They also lament that Medicare and Social Security are getting closer to insolvency and neither lawmakers nor most Americans seem all that concerned about it.  They also highlight yet another lie perpetrated by the Obama administration in getting the Iran nuclear deal done, this time allowing Iran access to U.S. banks while adamantly telling lawmakers it would not do so.

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Runaway Spending Will Engulf U.S. Soon

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Earlier this year, a $1.3 trillion dollar omnibus spending bill left many fiscal conservatives wretching over the rise in domestic spending, but Hillsdale College Prof. Gary Wolfram says mandatory spending is real emergency and we’ve got less than a decade to do something before it gobbles up all of our revenue.

Wolfram teaches economics and public policy at Hillsdale.  He also served as chief of staff to former Rep. Nick Smith, R-Mich, in the mid-1990’s and on the Michigan State Board of Education.

The omnibus controversy arose when President Trump and Republican congressional leaders agreed to huge increases in domestic spending in exchange for lifting the spending caps on national defense spending.

In a recent column, Wolfram explains that mandatory spending – Social Security, Medicare, Medicaid – is the much greater threat.  What makes it mandatory is specific congressional acts dictating how much is spent on those programs.

In our interview, he discussed how much federal revenue goes towards mandatory spending now and what it will look like in a few years if the problem is not addressed.

“If you look at mandatory spending plus interest on the debt, in 2019 it’s going to be 70 percent of the budget outlays and 89 percent of the revenue.  So if Congress didn;t enact anything, 89 percent of the revenue’s going out the door already with mandatory spending.

“If you get to 2028, according to the Congressional Budget Office, 98.5 percent of all the revenue that comes into the federal government is going to be spent already, either through Social Security, Medicare, Medicaid, and some other items that are already mandated, plus net interest,” said Wolfram.

“So if you do not do something about Social Security and Medicare, which between them are almost two trillion dollars in 2019 and are going to be $3.3 trillion in 2028, you’re not going to do anything about the deficit,” said Wolfram.

While Wolfram believes each mandatory program must be reformed, his first recommendation is to change the appropriations process.  In Wolfram’s home state of Michigan, the legislature determined how much is spent on each program every year, regardless of what is mandated in statute.  He says the same principle should be applied in Washington.

“Let’s say Social Security is supposed to spend $1.043 trillion in 2019.  If this were the way the Constitution worked in the federal government, Congress appropriates a trillion dollars.  Everybody gets their proportionate share of the trillion dollars.  I think that’s the type of thing we’ve got to be looking at,” said Wolfram.

Wolfram says Congress won’t get serious about reforming programs until members are faced with passing a massive hike on Medicare and Social Security taxes.

He ought to know.  When serving for Rep. Smith, Wolfram pushed legislation that would allow taxpayers to set aside a portion of the their Social Security tax payments into a private account in exchange for receiving smaller checks when they retire.  Only one other members showed up at the press conference announcing the bill.

But he says there are still measures that could do some good.

He says keeping the system in place for Americans 55 years and older is doable if younger people are told they won’t get Social Security benefits until they are 70 or 75.  However, he believes Medicare needs a far more drastic overhaul.

“With Medicare, you’ve got to change the way the system works.  You’ve got to make it like health savings accounts are in the private sector, where it’s a high deductible policy where you get so much and then you ask the question, ‘How much does it cost when you go to get your blood test?'” said Wolfram.

He says there are simple ways to drastically reduce Medicaid costs as well.

“Think of what the incentives are in Medicare or Medicaid.  It’s to produce something that the government will pay for, even if it’s inordinately expensive, because the person buying it  is not the person receiving it,” he said.

Wolfram says the health savings account approach works well on Medicaid as well.

“If you apply that to Medicare and Medicaid, it’ll change the whole incentives of the system.  I’ll be Walmart or Walgreens and I’ll have a nurse practitioner there, charge you ten bucks to tell you your kid’s got pink eye and then provide you with a prescription,” said Wolfram.

Congress refuses to deal with the problem, but Wolfram still holds out hope that lawmakers will do the right thing when they have no other choice.

“I believe at some point things are going to get bad enough that they’re going to have to deal with it,” said Wolfram.

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Why Millennials Should Care About Social Security Now

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By Ryan Brown

When President Franklin D. Roosevelt signed the Social Security Act in 1935, it’s possible he didn’t understand the huge effect his social welfare plan would have. In 2014, over 59 million Americans will receive almost $863 billion in Social Security benefits. 9 out of 10 individuals over the age of 65 receive benefits and among those, half of elderly married beneficiaries rely on Social Security for 50% of their income. 47% of single, elderly beneficiaries rely on Social Security for 90% of their income. These numbers are in addition to the disabled workers and dependent family members of deceased workers who also receive benefits.

In a word, Social Security is huge.

Unfortunately, the system is in dire need of repair, and that spells bad news for young people.

Andrew Biggs is a resident scholar at the American Enterprise Institute in Washington, DC, and he’s also worked as deputy commissioner of the Social Security Administration. When asked if Social Security will be around for millennials, his answer isn’t reassuring.

“The answer to that is yes and no,” he says.

Biggs says that the program isn’t going anywhere, but what a young person receives will vary.

“The idea that you’re not going to get a penny from Social Security, I really think is false. On the other hand, what are the chances I’m going to get everything I’ve been promised from Social Security? And I think those chances are pretty slim,” he says.

If that isn’t depressing enough, Biggs goes on to say that postponing the problem isn’t helping anyone either.

“The Sooner you fix it the easier it is. For every year that goes by, we’re essentially putting off the problem and so it gets to be harder to solve,” says Biggs.

A solution to the problem isn’t going to come easily, and that shouldn’t surprise anyone. Economists each seem to have their own ideas of how to create solvency, and they fiercely debate one another over the pros and cons of their plans.

Melissa Favreault is a Senior Fellow in the Urban Institute’s Income and Benefits Policy Center. She says that even if economists can’t come to an agreement, though, almost all the proposed solutions include some mix of adjustments on the tax or revenue side, and adjustments to benefits.

“Some of the proposals that are most common are things like lifting the cap on earnings that are taxable for Social Security. There’s also some talk about increasing the taxation of benefits, or broadening the base, for example, to include things like health insurance benefits that are currently not taxed for Social Security purposes,” she says.

The proposed benefits adjustments are equally varied.

“One that we hear a lot about are things like increasing the full retirement age, or increasing the early retirement age. We also hear about things like reducing the cost of living adjustment. Among proposals that we’ve seen in a lot of recent plans are adjustments in the rate of growth for benefits,” says Favreault.

Though a solution will likely entail a combination of changes, Biggs says the most likely change he sees is the retirement age.

“The retirement age currently is slowly shifting from 65 up to 67. It’s something that is not an easy change to make, but I think encouraging people to work longer is really the best way to address these issues,” he says.

But some are disappointed with any and all attempts at fixing Social Security. When the system was designed, it was based on a three-legged stool of retirement: private pension benefits, private savings, and Social Security. Many see a decline in private pensions and savings and an increasing reliance on the third leg, Social Security. For young people, this means they should start saving for retirement now. For other advocates, the increasing reliance on Social Security is the beginning of a downward trend, and they want the freedom to take their retirement savings into their own hands—to privatize the system.

While privatization models of retirement savings have shown huge gains for savings invested in the stock market, Biggs is quick to point out that the biggest issue in privatizing the system is something called “transition cost.”

“If you take the money that you’re currently paying into Social Security and you put it into a personal account on your own, that’s money the system doesn’t have to pay out benefits to your grandparents. So during that time, you have to come up with additional money to cover this transition,” says Biggs.

It’s that transition cost, and the fact that the current system needs money flowing in to function, that necessitates a multifaceted, well-thought-out solution to Social Security’s solvency issues.

For Favreault, the most important thing for young people to understand, is that Social Security requires a group perspective.

“We’re kind of all in this together, and we’re saying that as a society, we want people of retirement age and people who become disabled, or the children of workers who die before retirement, that they’re protected,” she says.

Biggs admits that, for a lot of young people, that can be hard to swallow.

“Is it fair to say that a lot of younger folks are kind of getting ripped of? Well, that’s kind of what the numbers show. So you want to find some solution that smooths things out and makes the system sustainable, not just in a financial sense, but sustainable in that people feel it’s something they can really support,” he says.

For a lot of millennials, Social Security is something that they see having little effect on their day-to-day lives. For a solution to the rapidly approaching solvency crisis, though, millennials and other young Americans will have to decide this is an issue they want to fix. Otherwise, they’ll bear the financial consequences.

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