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July 05, 2010 at 08:00 PM
Proposals for reining in Social Security and Medicare spending surfaced at a recent federal fiscal responsibility forum.
Witnesses appeared in Washington at a meeting of the National Commission on Fiscal Responsibility and Reform, a bipartisan body that is supposed to indentify policies “to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run.”
The commission is supposed to come up recommendations for balancing the budget, excluding interest payments on the debt, by 2015.
CUT
Robert Bixby, executive director of the Concord Coalition, Arlington, Va., a bipartisan group dedicated to fighting the federal budget deficit, said Medicare reform and Social Security reform are essential to budget reform.
Reforming Medicare and other government health programs could start with tasks such as shifting toward paying physicians on a per-patient basis, rather than per service rendered, and by subjecting more physician payment rates to review, Bixby said.
“Ultimately, these efforts to reform the large government health care programs will take time and a willingness to continuously revisit and re-envision health care reform,” Bixby said, according to a written version of his remarks.
Because controlling health care spending will be so difficult, “it is all the more urgent to save what we can in Social Security,” Bixby said. “Everyone knows what needs to be done, but no one wants to do it. Because the options are well known and have been debated for years, Social Security has gone from being the ‘third rail of American politics” to the “low-hanging fruit.’ The commission could have a powerful effect by making an obvious recommendation to phase-in benefit reductions and increase dedicated revenues.”
Starting in 2016, Social Security will probably start running a chronic deficit, and “Social Security will need to begin redeeming the special U.S. Treasury bonds that make up its trust fund account,” Bixby said. “That, in turn, will put pressure on the rest of the budget because the only choices available will be to cut other spending, raise taxes, or borrow the money (i.e., increase the deficit).”
If Democrats and Republicans work together to shore up Social Security, that would show the public that politicians can work together to solve important problems and that Washington is not paralyzed, Bixby said.
Two obvious solutions are to adjust the program to reflect Americans’ longer lifespans or to link Social Security benefits payments to consumer prices, rather than wages, when indexing benefits for inflation, Bixby said.
Congress could raise payroll taxes, but it should do so only after it has made serious efforts to lower the program’s cost, Bixby said.
