David Broder, who writes for the Washington Post, recently had a column about Social Security. If you can find it, it's worth a look--not for what it says, but for what it fails to say. As Broder gets older, he loses more and more of his marbles.
"A Hearing the Candidates Should Attend" by David Broder is filled with everything anyone ever wanted to know, except the basic question - why. Why is the Social Security program in trouble?
In the following statement Broder fails to provide a clear picture of the problem "unless ways are found to reform the financing and benefits of Social Security and Medicare, the demands imposed by the retirement of millions of baby boomers will consume the federal budget and blight the prospects of the next generations."
We didn't just wake up one fine morning and say "Oops... there is no more money in the kitty" that's not how government works, so what went wrong, why is Social Security in trouble? The answer is Social Security isn't in trouble, Medicare is and lumping Social Security and Medicare together is wrong, they are two separate programs.
Social Security benefits are paid through payroll taxes. Employers and Employees each pay 6.2% of wages, up to a maximum (2008 will be $108,000), while self employed individuals pay 12.4%.
In 2006, 84% of Social Security benefits came from payroll taxes, with 14% coming from interest earnings, and 2% from taxes on Social Security benefits.
The 2007 OASDI Trustees Report states " Social Security's combined trust funds are projected to allow full payment of scheduled benefits until they become exhausted in 2041"
The report continues "... financial adequacy of the program for the next 75 years could be restored if increases were made equivalent to increasing the Social Security payroll tax immediately and permanently from its current level of 12.4 percent (for employees and employers combined) to 14.35 percent."
In other words, the Social Security deficit over a 75-year period is no more than 1.95 percent of taxable payroll wages, not exactly a financial crisis.
Medicare presents a different problem. In 2008 the first 'baby boomer' becomes eligible for early Social Security benefits at age 62. She recently applied for benefits online, but her benefits do not actually begin until January of 2008. Three years later, at age 65, this person will become eligible for Medicare and over the next two decades 78 million more Americans will become eligible for Social Security and subsequent Medicare benefits.
The problems facing Medicare are as follows:
- Americans are living longer so they require health care over a longer period of time.
- Medical costs are rising at more than twice the rate of inflation.
- And the major problem - the 2003 prescription drug plan put forth by the Bush Administration
During a CBS 60 Minutes interview , David M Walker, Comptroller General of the United States made the following statement about the 2003 Medicare prescription drug plan " The prescription drug bill was probably the most fiscally irresponsible piece of legislation since the 1960s,"
David Walker, as chief accountability officer of the U.S. Government Accountability Office (GAO) and former Public Trustee for Social Security and Medicare from 1990 to 1995, is definitely someone 'in the know' when it comes to the status of Social Security and Medicare.
His following comment says all there is to say about the subject: "With one stroke of the pen, Walker says , the federal government increased existing Medicare obligations nearly 40 percent over the next 75 years."
This administration did not err in providing prescription drug coverage to senior citizens and the disabled; their error was in not negotiating lower prescription and medical costs prior to implementing the program.
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