President Obama’s and Governor Romney’s appearances on “60 Minutes” Sunday revealed an interesting contrast. The President punted on a serious question about the nation’s concern over spending—blaming everything on President George W. Bush.
Right. Obama’s been in office how many years now? At what point does he take responsibility for government policy?
On his turn, Governor Romney fielded a question about fixing one of the toughest programs to even talk about—Social Security. Despite umpteen government reports documenting Social Security’s plight, it still takes moxie these days even to admit Social Security is in sore need of fixing. To talk about a real solution takes real courage.
Romney, when asked how he would change Social Security, first made clear there should be no changes to benefits for those in or near retirement. This is consistent with entitlement reforms in the Ryan budget plan.
But he went on: “What I’d do with Social Security is say this: that again, people with higher incomes won’t get the same high growth rate in their benefits as people with lower incomes. People who rely on Social Security should see the same kind of growth rate they’ve had in the past. But higher income folks would receive a little less.”
CBS’s Scott Pelley: “So in the Romney administration, in the Romney plan, there would be means testing for Social Security and for Medicare?”
Romney: “That’s correct. Higher income people won’t get as much as lower income people. And by virtue of doing that–and again, that’s for future retirees. For–by virtue of doing that, you’re able to save these programs on a permanent basis.”
Americans are demanding real solutions to the nation’s spending challenges. And presenting serious solutions is vital, as Washington and the public come to grips with the kinds of decisions we must make as a nation. Is this a radical solution?
Hardly. Social Security is income-adjusted today. Benefits are already capped for high-income earners, and the calculation of initial benefits a new retiree receives is based on his or her past income, with higher-income earners receiving benefits that equal a lower share of their working income than lower income earners receive. Moreover, many retirees also have a share of their benefits taxed away, with upper-income retirees paying a much higher tax than those with lower incomes. Romney just proposes to extend this income adjusting so that upper-income retirees receive a bit less than they do now.
Medicare is also income-adjusted, except more explicitly. This happens through premiums paid for the prescription drug benefit, also called Medicare Part D, and for physicians’ services under Medicare Part B. Just how far means testing would go to shoring up the financing for these two programs of course depends on the details. But it is possible to solve Medicare’s financing problems entirely through expanding the use of premiums—or means testing—for affluent seniors. Better yet, these ideas for income-adjusting Medicare have long received bipartisan support, so there is nothing radical here whatsoever.
Should we and our children really pay higher taxes so Warren Buffett or Barack Obama or Mitt Romney can collect Social Security or Medicare benefits? In the same interview, President Obama said he was open to entitlement reform, but his solution, besides blaming Bush for all his economic and fiscal ills, would simply lock in these unaffordable benefits and raise taxes to pay for more spending (and then some).
Just today, Obama campaign senior adviser David Axelrod remarked that this “is not the time” to discuss Social Security Reform. Uh…. really? The Social Security trust fund is already running permanent deficits which will grow larger and larger in the coming years. Same leadership: no answers from the Administration. Sadly, Axelrod stuck to the same tattered refrain that entitlements must be dealt with “in a balanced way.” Yet, the problem is not balanced. When the economy recovers, revenues will return to and surpass their historical levels. Yet spending will skyrocket. We are facing a spending problem.
Entitlements—Social Security and Medicare, along with Medicaid—are unsustainable and unaffordable. (continues below chart)
Without reform, they would push federal spending to nearly 36 percent of the economy within a generation. Debt held by the public would explode to nearly 200 percent. Neither of these outcomes can really happen, of course, so serious structural reforms are inevitable. Serious solutions are needed now, and expanding means testing further is both serious and sound.
But solving these programs’ finances won’t be enough. Their benefits are both in need of a complete overhaul as well. Today, too many Americans live in poverty because their Social Security benefits are below the poverty level. Unfortunate retirees who cannot afford Medi-gap insurance coverage and develop a catastrophic illness find themselves facing bankruptcy because Medicare does not offer catastrophic coverage. We can and we must do better to strengthen and preserve the security net for those who truly need it.
These kinds of solutions can be found in Saving the American Dream, Heritage’s blueprint for solving our spending and debt crises; solutions like slowly moving to a flat Social Security benefit that keeps seniors out of poverty, means testing Social Security so very affluent seniors have a reduced benefit, and moving to a more robust means-tested premium support mechanism for Medicare that offers seniors choice and control over their health dollars and better health outcomes.
Like the tick-tock of the “60 Minutes” soundtrack, the entitlement crisis is looming, and Washington must face these facts and get cracking on solving it. Governor Romney offered up a serious start Sunday.