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The State of the Union 2011

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Health and retirement policy specialists say the future state of the union could be grim if the United States fails to understand and fund the benefits promised by government agencies and private employers.

President Obama touched on benefits funding concerns tonight during his State of the Union speech, but he did not make even the kind of brief reference he made to private retirement accounts in his 2010 State of the Union Speech.

Obama noted early in the speech that state of the union 2011Democrats control the Senate and Republicans control the House.

“We will move together or not at all,” Obama said.

One of the challenges that Democrats and Republicans must join to face is federal budget deficits, Obama said.

“Our government spends more than it takes in,” Obama said. “That is not sustainable.”

Obama said that he would propose a 5-year freeze on discretionary domestic spending that would save $400 billion over 10 years, and that he would start a major effort to streamline the federal government. But any serious efforts to fight the deficit must also include cuts in defense spending, health care spending, and “spending through tax breaks and loopholes,” Obama said.

Republicans say the Affordable Care Act, the new federal legislative package that includes the Patient Protection and Affordable Care Act (PPACA), will increase the federal deficit; Obama said it will cut the deficit by slowing the increase in health care costs.

“I’m willing to look at other ideas to bring down costs, including one that Republicans suggested last year: Medical malpractice reform to rein in frivolous lawsuits,” Obama said.

Obama said he does not want to re-fight the battles of the last two years but is open to working with Republicans on improving the new health care law. One place to start improving the law would be to eliminate the dramatic expansion in Form 1099 vendor reporting requirements created by PPACA Section 9006, Obama said.

“What I’m not willing to do is go back to the days when insurance companies could deny someone coverage because of a pre-existing condition,” Obama said. ” I’m not willing to tell James Howard, a brain cancer patient from Texas, that his treatment might not be covered.”

Obama also mentioned the finances of Social Security.

Obama said he wants to “find a bipartisan solution to strengthen Social Security for future generations.”

“And we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans’ guaranteed retirement income to the whims of the stock market,” Obama said.

The United States should end the tax cuts that recently were extended for the “wealthiest 2% of Americans,” Obama said.

“Before we take money away from our schools, or scholarships away from our students, we should ask millionaires to give up their tax breaks,” Obama said. “It’s not a matter of punishing their success. It’s about promoting America’s success. In fact, the best thing we could do on taxes for all Americans is to simplify the individual tax code.”

THE REBUTTALS

Rep. Paul Ryan, R-Wis., said in the official Republican rebuttal to Obama’s speech that both parties share responsibility for the budget deficit.

If the government fails to act, the United States eventually could have to impose the kinds of emergency benefits cuts and large tax increases now being adopted in countries such as Greece and the United Kingdom, Ryan said.

Ryan also criticized the new federal health care laws. “Costs are going up, premiums are rising, and millions of people will lose the coverage they currently have,” he said.

Rep. Michelle Bachmann, R-Minn., the founder of the House Tea Party caucus, said that, instead of getting a leaner, smarter government two years ago, “we bought a bureaucracy that tells us which light bulbs to buy, and which will put 16,500 IRS agents in charge of policing President Obama’s health care bill.”

“ObamaCare mandates and penalties will force many job creators to stop offering health insurance altogether, unless yours is one of the more-than-222 privileged companies or unions that has received a government waiver,” Bachmann said. “In the end, unless we fully repeal ObamaCare, a nation that currently enjoys the world’s best health care may be forced to rely on government-run coverage that will have a devastating impact on our national debt for generations to come.”

Obama should “repeal ObamaCare,” support medical malpractice reform, and support efforts to let Americans buy health insurace policies from out-of-state carriers, Bachmann said.

EARLY REACTIONS

Cathy Weatherford, president of the Insured Retirement Institute (IRI), Washington, says in the IRI response to Obama’s speech that her group has concerns about efforts to “eliminate all tax exenditures.”

About 7,000 baby boomers will turn 65 each day in 2011, few have defined benefit pension plans, and “millions of consumers will be looking for ways now more than ever to provide income throughout their retirement,” Weatherford says. “Now is not the time to consider potentially burdensome restrictions on the ability of those lacking financial security to access insured retirement solutions. IRI’s highest priority is to protect the provisions in the tax code that encourage retirement savings and in particular the provisions related to the deferred taxation of insurance products.”

The American Academy of Actuaries (AAA), Washington, has used the occasion of the State of the Union address to propose increasing the normal Social Security retirement age and taking other steps to restore Social Security to actuarial balance. An increase in the retirement age would help curb the program cost growth that has resulted from improvements in life expectancy, the AAA says.

The AAA says it also would like to see more support for use of lifetime income options that would help workers in 401(k) plans and other defined contribution retirement plans manage longevity risk, inflation risk and investment risk.

James Klein, president of the American Benefits Council, Washington, says he did not hear anything specific about employee benefits and was not expecting to.

“This speech was about creating jobs and innovation and, understandably, the president does not want to re-fight the battle over health care reform,” Klein says. “I liked the president’s repeated references to unity and civility and that we should relish, not back away from, our many challenges…. I felt that the mixed seating of the members by party helped make the tone more subdued. It will be interesting to see if it is a practice that lasts.”

Additional information was contributed to this report by Warren S. Hersch.