The business section of today's Boston Globe featured three articles about growing federal entitlements and the consequences of inaction. In short, the entitlement programs of Medicare and Social Security are going to exhaust their trust funds in 2020 and 2036 leading to automatic benefit cuts for both programs based on current law. Here are some excerpts:
By 2020, the Congressional Budget Office estimates, Medicare’s main trust fund will be effectively drained, requiring a strict “pay as you go’’ system financed by payroll taxes and money squeezed from other federal programs, assuming the current structure of Medicare is kept intact. Longer-term projections point to multitrillion-dollar deficits for Medicare stretching late into the century, economists said.Social Security: "Waiting to address a shortfall could worsen problems, analysts warn"
Whatever solutions lawmakers choose, it’s better they act soon, economists said. Each delay compounds the program’s financial problems, which in turn would require more drastic tax increases, benefit cuts, or both.Of course, that's also true for Medicare and a host of other federal programs where promises have long out-paced reality. What will happen if we keep kicking the can down the road? "The clock is ticking in the debate over how to fix programs"
If something isn’t done relatively soon, economists say, higher interest rates, a weaker dollar, increased payroll taxes, and deep cuts to other federal programs are among potentially dire consequences that could mean slower growth, higher unemployment, and lower standards of living.I've said it before and I'll write it again: the problems in Europe don't need to be repeated here in America if we face up to our long-term problems and take positive, if painful, steps towards resolution. The sooner we face up to mathematics, the pain of reform can be spread over decades rather than the sudden shock of automatic benefit cuts.
It's time to be adults.