Posts
Here's an interesting article talking about the social security and medicare programs and how they are facing trouble in the future. I thought this went well with what we've talked about in previous classes about major entitlement programs and how we should address them. Here's a little bit which I thought was interesting...
"Social Security will have sufficient resources to pay 100% of promised benefits through 2036. That's one year earlier than last year's forecast because the economic recovery has been slower than expected and seniors are living longer.
After 2036, the program will only be able to pay 77% of promised benefits."
Even though I'm not a big fan of projections that are decades away, I think that we are going to face major problems with these programs in the future if we continue to pay out more than we are taking in. Last year was the first time the program took in less payroll tax revenue than the benefits paid out. What are your thoughts on these major programs and the future of them? What changes are needed in order to make them successful programs?
Subscribe to:
Post Comments (Atom)
"That fund reflects the $2.6 trillion of surplus revenue paid into the program since 1983. The surplus revenue, however, was spent over the years by the government and in exchange it issued non-marketable U.S. bonds to the trust fund.
ReplyDeleteAs the program starts redeeming those bonds, the Treasury will need to either borrow more money, raise taxes or cut spending, since the country is already operating in deficit."
This part seemed a bit odd to me. I think the approach of issuing bonds is a good one, and clearly it has worked in the past. So, why don't we just continue to do that to fund part of social security? The article masks this by saying, "borrow more money". I think that's a straw-man argument.
However, more to the point...I feel as though we could list hundreds of approaches for how to solve this problem, but I think we'd end up going in circles.
The main thing I would like to see is the government owning up to this problem and making these soon-to-be retirees aware of the problems ahead of them, if they are relying on social security. US savings rates are terrible. There are going to be a lot of people facing rude awakenings.
It's not a nice conversation to have, but the government needs to get this information out to the public - tell it like it is.
Dane, I agree with you 100 percent about the government being honest about the hardships of the program ahead. However, I think at the end of the day, seniors need to be taken care of. It is unacceptable to allow seniors to face 'rude awakenings.' They have paid taxes, paid into social security, fought in our wars, and contributed to our security in numerous ways and deserve upon their old age to be compensated (or whatever you want to call it) as their health deteriorates with age.
ReplyDeleteNow, maybe social security isn't a sustainable program. Maybe solutions for that system are moot to talk about. But some discussion needs to happen to find a new solution so that seniors are not facing a rude awakening. Not acceptable.
Our social security program isn't a sustainable program in the long-run simply because it did not take into account the baby boomer generation. Now that these baby boomers are beginning to retire we all of a sudden have more people needing social security then people are actually paying in. It sucks that so many people are stuck facing these "rude awakenings", but as Beth mentioned we have to take care of our elderly population. That either comes in the form of increased taxes or spending cuts, I personally think it needs to be a combination of the two. I am confident that our government will do what it takes to take care of our elderly population. However, I think the biggest lesson here is for our generation and that lesson is SAVE! We as a nation are so bad about saving because we've grown up relying on these programs, well guess what they can fail and they're not going to be around for us when we retire. I can't find the article now, but there was some stat that something like less than 20% of people 40 and over have less than $10,000 in their savings account (don't quote me on the exact numbers but the point is nobody has really saved to this point). How will anyone be able to retire in the future when these programs do end up failing completely? We won't so don't completely rely on any program in the future and we need to start saving now.
ReplyDeleteGreat point Matt! That is exactly the lesson today's generation needs to learn. I believe the U.S's savings rate last year was only 5% (don't quote me) or somewhere close to that. If you compare that with China (they had a 50% savings rate last year) it is extremely alarming to see how little we do save. Makes it scary to think about our futures, but there is still time for our generation to change things.
ReplyDeleteYes another thing to remember is that social security was not designed to take care of the elderly on its own. It was envisioned as on of three sources of income along with personal savings and a pension. For the program to be sustainable we will probably have to increase the age of eligibility, cut benefits, or both. It is not fair to criticize the program for not taking good enough care of elderly people when it was truly designed as a supplement.
ReplyDeleteThis talk of "projections" reminds me of what Dr. McKinney put on the board last Tuesday. We know that there is going to be a shortfall in the future, but we don't know exactly when. The question that comes to mind then is, is Social Security going to be like Kalamazoo (i.e. planning ahead, analyzing data, making cuts) or is it going to be like the other cities that just assume something significant will change in the future?
ReplyDeleteI completely agree with Eric that the program was not intended to be more than a supplement to the elderly. The elderly should be relying more on their savings and investments since you should be the one taking care of yourself, not the government. Remember, a lot of these people also have pension plans (especially in Michigan) where they maintain some source of income. The auto industry took a big hit when the economy slowed and they still had hundreds of pension plans to pay off instead of using the money to better their business. Ford refinanced and planned ahead so they have been able to sustain these plans, however the other auto companies have not fared so well in Michigan.
ReplyDeleteI don't think that the elderly should be left completely in the dust, so the government needs to make cuts and plan ahead if they want to continue to supplement the elderly.
Medicare is financed through a combination of payroll taxes, premiums and general revenue. The problem is that spending has been growing faster than the economy and is projected to do so indefinitely. I agree with Dane that there are many solutions to this problem but the major issue lies in how to implement new changes. Medicare and Medicaid enrollees have increased to 47 million, and the real cost per enrollee quadrupled, according to data from the Centers for Medicare and Medicaid Services. I don't think Paul Ryan's plan is the answer to medicare but I like how the plan looks to raise the Medicare eligibility age from 65 to 67 by the 2030s. Much of the concern about Ryan's proposal is that it proposes converting Medicare from a fee-for-service program into a "premium-support" system for everyone under 55 today. Another downside is that most elderly people would end up paying more for their health care than they would under the current Medicare system. Also the proposal, noted concern that his efforts to control Medicare costs are not paired with efforts to control health costs, and adversely affect affordability. So as social security benefits decrease, how will the elderly pay for health care?
ReplyDelete