Conspicuously absent from the presidential campaign is any mention of Social Security and Medicare.
Long considered the third rails of American politics (i.e., touch it and you die), Democrats and Republicans alike talk about the need for changes to these programs. But the only real change in the last 20 years — the Medicare reform bill that passed last year — only exacerbated Medicare’s fiscal insolvency.
The Medicare program is already spending more money than it takes in.
- This year, the deficit in the seniors’ health program will be $3 billion.
- By 2020, that gap will reach $102 billion.
- And the program will be $664 billion in the hole by 2035.
Social Security isn’t much better off. It’s fiscally solvent until 2018. Then the red ink starts to pile up.
- In 2020, the gap between the retirement program’s income and payouts will be $85 billion.
- By 2035, it will be $747 billion.
Add them up and you have promises made to those retiring in 2035 and after of almost $1.4 trillion that payroll taxes will not support.
So where is this money going to come from? That’s right, taxpayers. Income taxes will have to be diverted or payroll taxes increased to pay for promised benefits.
Of course, benefits could be cut. But that’s never a popular solution — especially with seniors and those near retirement, who vote in big numbers.
So that leaves — drum roll, please — overhauling the system, which is very popular with younger workers and should hold harmless older workers or retirees. The most popular approach on the table comes from IPI Senior Fellow Peter Ferrara. It allows workers to set aside a significant portion of their income — an average of 6 percentage points of their 12.4 percent payroll tax — into personal accounts.
These accounts are the only effective way to stop your payroll taxes from being sucked down that great black fiscal hole. The sooner we put that plan in effect, the sooner that great sucking sound goes away