The economic news coming out of Washington has been very good lately. The economy is growing at a brisk pace, and unemployment is the lowest in decades. Some of the best news is that joblessness for African-Americans and Hispanics is at historic lows. More Americans of modest means are finally sharing in the economy’s improvement, after years of struggling to find work when it was sluggish. Much as his critics hate to give him credit for it, President Trump’s focus on growth should be recognized for helping improve the lives of hard-working Americans.
But a cloud on the horizon comes along with this bright scenario. Buried in the news last week was the annual report of the Social Security and Medicare trust funds. It is a key indicator of the health of these two major social insurance programs. And while their immediate financial health is not in danger, there are clear signs that over the next decade, both programs will deteriorate significantly unless leaders take steps soon to ensure their continued solvency.
Social Security’s Trustees Report projects this year that the agency’s trust fund will suffer its first shortfall since 1982, taking in less in payroll taxes than it will pay out in benefits, meaning the program will have to tap its reserves. That’s not an immediate threat to Social Security recipients, but if action isn’t taken soon to strengthen the program, the reserve fund will be depleted by 2034. At that point, benefits would have to be cut for the millions of seniors who depend on this safety net.
The trustees of Medicare predict that its situation could be even worse. Without reforms, the Medicare trust fund — also financed through payroll taxes — will be depleted in 2026, three full years earlier than previously projected. That’s because baby boomers are aging, and flooding the system with new beneficiaries. Adding to the problem are the steep increases in health care costs over the past few years.
This coming “perfect storm” can be avoided, but it will take leadership from Washington. As my former colleague Sen. Orin Hatch has said, “We must not turn a blind eye. We should keep our attention on reforming these programs so that they can truly benefit future generations.” Hatch is right, and if Social Security and Medicare don’t get fixed now, the damage later could be irreparable.
So what’s to be done? The experts tell us that with a judicious mix of basic reforms, these entitlement programs can be saved, and even strengthened. The problem has been a lack of will, and political posturing. Every time anyone in Washington shows even a little courage by suggesting reforms, the naysayers and fear-mongers frighten the American public with dire predictions of severe cuts or even the elimination of these popular programs. Sadly, this “third rail” of American politics — which politicians are afraid to approach — has paralyzed Washington for too long.
But there’s a way to deal with the impasse. We can take a page from the playbook of one of the great political leaders of our time, Ronald Reagan. It was Reagan who, in the 1980s, had the vision — and the gumption — to deal with the issues relating to these entitlements. He did it in classic Reagan fashion, by reaching beyond partisan pettiness to assemble a broad-based group of leaders who focused on finding common ground.
Reagan’s National Commission on Social Security Reform included then Federal Reserve Chairman Alan Greenspan, Sen. Bob Dole and New York’s senior senator, my dear friend Patrick Moynihan, among several other respected leaders. They hammered out a careful fix for Social Security that lasted for three decades. Their key to success was that everyone gave up something.
Republicans went along with carefully increasing the Social Security tax base to generate more revenue for the program, while Democrats accepted modest limits on benefits. Both sides agreed to raise the retirement age. And then President Reagan and House Speaker Tip O’Neill sealed the deal and ushered it through Congress.
Think such a deal is impossible today? Maybe not. Once the 2018 election silly season is over, Trump should dust off the Reagan playbook and assemble his own team of stars to tackle the looming twin crises facing Social Security and Medicare. Leaders like former Federal Reserve Chairs Ben Bernanke and Janet Yellen, and soon-to-be retired Senator Hatch come to mind.
Al D’Amato, a former U.S. senator from New York, is the founder of Park Strategies LLC, a public policy and business development firm. Comments about this column? ADAmato@liherald.com.