For years, deficit hawks have complained that the federal government was papering over the difference between revenues and spending by dipping into the Social Security “trust fund” – the difference between retirement taxes collected and money paid out.
According to Phil Smith, National Political Director of the Concord Coalition, that cash cushion is in any case going away. “We’re entering cash deficit territory for Social Security,” Smith said, speaking at the April 20 meeting of the Economic Forum of Palm Beach County.
Although this day has been predicted for years, the previous official projection was that Social Security spending would exceed revenues for the first time in 2016. But when updated figures are published by the Social Security trustees, probably in June, Smith expects them to show that milestone has already been reached.
That’s both a factor of a weak economy and diminished revenues and of long term demographic trends – an aging population, coupled with a lower birthrate and fewer workers supporting more retirees.
The Concord Coalition’s mission is to promote fiscal responsibility on a nonpartisan basis, and the Social Security deficit is one of many reasons Smith gave why the nation needs to get serious about controlling its annual deficits and rising national debt.
The federal government now pays more than $200 billion in interest on the debt alone, “and whatever it is you want from your federal government, that is $200 billion that is not available,” Smith said.
Serious solutions to the federal government’s fiscal policies have get little attention when our leaders spend their time on grandstanding and partisan sniping. Probably the best chance of serious reform in entitlement programs came in the late 1990s, when President Clinton agreed to a series of presidential Town Hall meetings on the issue, Smith said. In one press conference, he said he would not rule out the idea of replacing the current system with private retirement accounts (a conservative proposal later championed by President George W. Bush). But Clinton’s openness to new ideas evaporated soon after.
“That happened to be the same day Monica Lewinski was given immunity,” Smith said, and in the sex scandal that followed the White House went into defensive mode, Republicans went on the attack, and discussion of serious issues evaporated.
The federal government did achieve a couple of years of surplus in the 1990s, partly because of a roaring economy combined with the “peace dividend” from the end of the Cold War. Now, our economy is suffering and defense spending has risen for a nation at war. The nature of our cumulative debt has also changed, compared with historical debts such as the one run up during World War II. Then, the debt was largely held by Americans who bought war bonds, and it was paid off fairly quickly after the end of the war. Now, our debt is held largely by foreigners and seems unlikely to be paid off any time soon.
The recent health care reform legislation does have some potential to trim the deficit, Smith said. The nonpartisan Congressional Budget Office projected about $100 billion in savings from parts of the legislation aimed at controlling the rise of health care costs. Smith said he considered this “a tentative beginning, at best” at balancing health care costs and revenues. The projected savings also depend on consistent implementation of the reform policies, which is by no means assured. For example, the implementation of a tax on generous “Cadillac” health care plans has already been postponed.
The nation’s fiscal problems are deep enough that they cannot be solved by trimming foreign aid, or cutting the space program, or rooting out waste. “I really wish there was a line item in the budget for waste fraud and abuse, so we could just cut it out of there,” Smith quipped.
Instead, what is really going to be required is to curtail popular programs no politician wants to touch or take other unpopular steps, like raising the minimum retirement age for Social Security. Spending controls will also have to be accompanied by tax increases.
“The official position of the Concord Coalition is that everything should be on the table. You cannot look solely at benefits reduction because the cuts would have to be so draconian,” he said. Yes, lawmakers will have to be careful not to raise taxes in a way that chokes off growth. But what won’t work is to go on “taxing as if we’re a small government and spending as if we’re a big government.”
One way we as voters can help make positive outcomes more likely is to make sure we show support for politicians who exhibit courage when it comes to making the difficult but necessary decisions, Smith said.