As elections approach, sweeping generalizations have a certain allure that often energizes the frustrated and captivates the hopeful. However, it’s essential that we as voters remember that things that seem too good to be true typically are. Here are a few warnings.
First, as far as our finances go, beware of politicians promising that they won’t touch Social Security and Medicare. In reality, they’ll have no choice. For one thing, if they keep this hollow promise, Social Security benefits will be cut across the board in 2033 by over 20 percent. According to the Committee for a Responsible Budget, that’s a cut of between $12,000 and $17,000 annually for a traditional retired couple. Medicare faces the same predicament for a variety of reasons.
The only workaround from this reality, which has been known for decades, is for Democrats and Republicans to finally come together for serious reform. That will likely result in a reduction of benefits and an increase in taxes. As unpleasant as it will be, we’d better hope that politicians don’t take the cowardly path and resort to shoving the problem onto Uncle Sam’s proverbial credit card (by paying all benefits that exceed payroll-tax receipts out of general revenues).
As the Manhattan Institute’s Brian Riedl noted recently, “Social Security and Medicare are projected by the CBO to spend $156 trillion in benefits but collect only $87 trillion in payroll taxes and premiums. This $69 trillion cash shortfall will have to be financed by budget deficits, which will in turn be responsible for $47 trillion of interest costs on the national debt.” Who will lend the U.S. government $114 trillion, even at unprecedentedly high interest rates?
That’s a question voters should ask politicians who promise never to touch entitlement programs. Those who claim it’s an easy fix by taxing the rich should be immediately dismissed as unserious. The numbers don’t add up. Any other one-sided ideological answers to an accounting question won’t cut it, either.
Hellbound and Down 