Dire Predictions on SS/Medicaire Implosion

[Fern]

Did anyone catch the recent interview with the guy from GAO (General Accountability Office) who i guess is the money man behind Social Security and Medicaire programs?

He was saying that we're headed toward a huge crisis, that we're spending more than we are putting into these earnings with baby boomers living longer, etc., a federal deficit that just doesn't quit. Maybe it's nothing new, but it's scary to see someone in a position to know about this warning of looming crisis.

Several senators were interviewed and they all agreed he's right, hardly anyone disputes his numbers, but nothing's been doing apparently becus it's far easier to 'pass the buck' and let the next generation deal with it.

They said Bush's inclusion of prescription drugs in the Medicaire program was a really bad move. I know as consumers we'd all disagree with that, but once again, i seriously wonder if SS will be there for me when i'm ready to tap into it in about 20 or 25 years.

[jIM_Ohio]

Comments like this will be "partison" towards what party wants to do...

that being said, I heard/read that SS can become "viable" if they reduce benefits to 70-80% when the "surplus" ends.

There are really several related problems with the whole situation.

1) at some point the system will pay out more than it takes in
2) money in the 1980's was "borrowed" from a SS "trust fund" and not repaid
3) Health costs are increasing higher than inflation
4) the system was put in by democrats in the 1940's as "wealth redistribution" and this makes system quite "socialistic" in how it accomplishes things.

My benefit right now is $2500/month according to the statements I get. I have worked long enough to earn "maximum benefit". The issue at stake is whether there is enough money to pay me this benefit, and how much of this benefit gets taxed. More than likely these are the issues the politicians will speak of... taxing and/or reducing benefits.

The real issue is "wealth redistribution" and programs related to it. The government is really taking 7% of the wages made by the working class (90% of people?) and redistributing this wealth to the 10% which cannot work.

There are "social" benefits to this. Retirees without any savings is most obvious. But it is also "social insurance"- allowing people which used to work but become disabled to not be destitute.

I don't see the system "ever" going away.
I don't see the trust fund ever getting repaid (which makes system bankrupt sooner).

The issue as I see it is the government will cap increases to benefits, delay increases to benefits, and reduce benefits for those "which have not received a benefit yet but are supposed to receive one because they paid into system". I look at this as a band aid... but as long as government does not increase taxes to fix this, I am OK with what they decide.

[Scanner]

Medicare and SSI are really 2 seperate issues and they shouldn't be conjoined in a discussion.

With SSI, one thing that would help (but be unpopular) would be to tax over the maximum but don't increase the benefit anymore. In effect, more "taxing the rich to feed the poor." Couple that with raising the age to 70 or 72 would help balance things fiscally.

With Medicare, in a way, that has to exist. No ins. co. in their right mind is going to insure a 65 y.o - it's a complete loss to do so from a risk standpoint. So the "welfare state" is the way to go.

"We all pay for it anyway" as Bill Clinton said during health care reform 1992 - it's just a matter doing it in a equitable way. Unless we make it legal to toss people out on the streets from hospitals, this is going to be a problem.

The Mass. initiative looks interesting (mandating that everyone have it) and many states are watching.

[MonkeyMama]

I always look to the GAO as the voice of reason. They audit a lot (all?) of the government spending and unfortunately no one ever pays any attention to them. The office it selfs seems rather unpartisan.

"Under recently passed legislation, we have changed our name from the General Accounting Office to the Government Accountability Office. The Government Accountability Office (GAO) is an agency that works for Congress and the American people. Congress asks GAO to study the programs and expenditures of the federal government. GAO, commonly called the investigative arm of Congress or the congressional watchdog, is independent and nonpartisan. It studies how the federal government spends taxpayer dollars. GAO advises Congress and the heads of executive agencies (such as Environmental Protection Agency, EPA, Department of Defense, DOD, and Health and Human Services, HHS) about ways to make government more effective and responsive. GAO evaluates federal programs, audits federal expenditures, and issues legal opinions. When GAO reports its findings to Congress, it recommends actions. Its work leads to laws and acts that improve government operations, and save billions of dollars. "

[MonkeyMama]

With SSI, one thing that would help (but be unpopular) would be to tax over the maximum but don't increase the benefit anymore. In effect, more "taxing the rich to feed the poor." Couple that with raising the age to 70 or 72 would help balance things fiscally.

It has been frustrating to see government approach the social security issue as so all or nothing. I have thought of many ways like this they can prolong SS. A few little tweaks to the system could keep it going a little longer until we figure out more long-term solutions. Obviously we are all living a lot longer, maybe changing the age should be considered. Up it 10 years, hell, I don't expect to see SS anyway.

Well doing nothing is not solving anything, that is for sure...

[sweeps]

30 years (or whatever the projected time to insolvency currently is) is a long time from now. A lot can and will change before then. There are much more pressing issues to deal with in the meantime.

[Fern]

No sweeps, on this i have to disagree with you. The system needs to be fixed, and it's not going to be an overnight solution.

I remember the guy saying that the Medicare issue was going to be a much bigger crisis, and happen more quickly, than the Social Security thing, which we've all heard about by this time..

Looking at it this way, and in light of this note of alarm, i would welcome Bush's call for privatization so i could at least control my own $$ and not live in fear that it's going to be taken away from me.

[disneysteve]

With SSI, one thing that would help (but be unpopular) would be to tax over the maximum but don't increase the benefit anymore.

They already do this. The amount of income subject to SS tax goes up each year. At least for me, it has risen far faster than my income, so every year I pay SS taxes on more and more of my income, even though my ultimate benefit from the system won't change. I agree that they will continue to raise the tax in this manner so that higher income earners will pay more and more into the system (even though they will get less and less out of it).

[disneysteve]

I remember the guy saying that the Medicare issue was going to be a much bigger crisis, and happen more quickly, than the Social Security thing, which we've all heard about by this time.

This is true. Medicare is kind of the hidden crisis brewing. I don't have the exact numbers in front of me, but the projected shortfall with Medicare is like 20 times greater than the projected shortfall with SS. The biggest problem, by far, for future retirees will be the cost of healthcare.

[sweeps]

The problem is these calculations are based on complete SWAGs (scientific wild-ass guesses). Slight tweaks in the variables (productivity, population growth, longevity, inflation,.....) changes the results dramatically. Making major policy changes in light of something so abstract and debatable is not wise in my opinion.

As a saver and an investor, sure, I'd love to get free money in my pocket to invest with now and call my own. But (and this is a big But) the needs of the elderly and disabled will never go away. Social security and Medicare were never intended as a retirement plan -- they're there to help people who are currently in need. If we take a chunk out now and divy it up for personal investments, we'll just have to pay that back later.

[Scanner]

This is why I have advocated paying down the National Debt as a priority for this country (ala Ross Perot) for so long. If we do that, then we can strengthen the dollar and strengthen programs like SSI and Medicare with discretionary tax dollars.

The whole idea of National Debt as a political issue seems so passe, esp. since Republicans took office and re-institued Reag-o-nomics. Nobody even brings it up anymore.

Anyway, "taxing the rich" will only go so far because there are solid loopholes around paying SSI - mainly huge SEP-IRA's and Keoughs with huge contribution maximums, not to mention setting up S-corps and other accounting "tricks" that can be done to avoid SSI, which every rich person is going to have at their disposal.

I am not adverse to taxing the rich. . .but it sure can't be the only solution as DisneySteve points out.

[sweeps]

If you don't "tax the rich", then what do you do? Here are your options:
(a) Tax the middle class (and still tax the rich because you won't be able to squeeze much blood out of that turnip)
(b) Let people die/starve

[jIM_Ohio]

Looking at it this way, and in light of this note of alarm, i would welcome Bush's call for privatization so i could at least control my own $$ and not live in fear that it's going to be taken away from me.

I used to be in favor of private accounts, then I heard two arguments which changed my mind:

When this was done in other countries, the markets and SS system attached to them collapsed. This could spark a great depression wide panic. Invest in guns and ammo is what I'll do.

Second, is SS is a safety net. It's the WORST I can do. And people live on it now. So with a safety net in place, I can invest more aggressively without losing "everything".

[Fern]

Do you know what other countries privatrized SS-like accounts?

[jIM_Ohio]

Chile, and UK I think.

here's a link. Found it by googling, it was first hit.

Twelve Reasons Why Privatizing Social Security is a Bad Idea