The Social Security and Medicare Trustees reports, originally due in April but postponed due to the passage of healthcare reform, were due today. As of noon Central time nothing on their web site about it and no notice from any of the major news organs. I’ve read a few speculations that the report might be available in August. I’m guessing November. After the midterm elections.
There are some posts on “fixing” Social Security floating around here and there. Megan McArdle weighs in on the political difficulty of making Social Security actuarially solvent by lifting FICA max (the highest income on which the social security tax if levied). I think the problem is somewhat different than the manner in which it’s being couched. If incomes in the lowest four income quintiles (all of which are subject to the social security tax in whole) had risen just a little bit faster over the period of the last thirty years, we wouldn’t be talking about problems with the fund now. At this point and with things as they are the problems with Social Security will probably be solved by some combination of raising FICA max without increasing benefits, changing the benefits formula, and raising the social security retirement age. As I’ve said before I think that a third category of Social Security recipients should be created to deal with the differences in ability to work over the age of 60 of, say, college professors and coal miners.
The relatively trivial problems of Social Security shouldn’t even be mentioned in the same breath as the problems of Medicare. I’ve long favored means-testing of Medicare and, possibly, raising the Medicare eligibility age. No one seems to be willing to mention the dirty secret of Medicare: there is no solution to its actuarial mess without reducing the incomes of doctors and hospitals. If you don’t believe me, just look at the numbers and the rates of increase. Eliminating waste, fraud, and abuse won’t do the trick. Too much of it is systemic—based on treatment styles. Reducing excessive consumption won’t do it, either, unless you define excessive consumption as treating anybody over the age of 75.
Medicare continues to serve a legitimate societal good: it keeps the elderly from becoming wards of the state (or from dying in rags in the streets). The security that Medicare and Social Security provide helps retail, too—people spend more than they would without the plans.
There are several nice things about Social Security. First, it’s a long-term problem. The trust fund doesn’t go out of balance for several decades, so we have plenty of time to phase in changes slowly.
That’s like, so 2007. There are good reasons to believe that Social Security outlays have exceeded its revenues this year, a whole five years ahead of schedule. That’s why I’m harping on the trustees’ report. We may not have as much time to deal with the problem as he thinks.