Cuts Are Coming to Social Security and Medicare Whether the Politicians Want Them or Not

Social Security and Medicare are on an “unsustainable course” and will run out of funds by 2037. That’s the conclusion reached by the General Accountability Office (GAO) and the Social Security Administration.

There is no saving these programs without massive changes. And demagoguing the issue, as Joe Biden and the Democrats are doing, only delays the day of reckoning. To pretend these programs don’t need intervention now — right now — is to play with dynamite. The sooner we can get started, the less pain will be inflicted on senior citizens.

Pain there will be. In order to put these programs on the path to long-term viability, it will take political courage absent from today’s politicians.

Veronique de Rugy has been the Paul Revere on Social Security unsustainability for as long as I’ve been writing. Her article in Reason.com explains the problems with the two biggest government programs plainly and succinctly.

It’s important for people to grasp reality because no single issue will affect our fiscal future more than Social Security and Medicare. Spending on these two programs alone consumes 45 percent of the federal budget. Along with Medicaid, these programs are the drivers of our current and future debt. And to drive home the seriousness of our predicament, note that Medicare and Social Security together face a shortfall of $116 trillion over the next 30 years.

That’s more than five times the current gross domestic product. But Biden wants to demonize Republicans for trying to address these long-term problems?

There is no political consensus on what to do about these two programs. Democrats want to raise the retirement age and charge retirees more for Medicare. That’s a bandaid that won’t even extend the viability of the programs for much more than a decade.

But a proposal like that will never get through Congress. And because of that, the consequences that flow from that inaction have already been established.

Consider again Social Security. Right now, benefits paid out come from the payroll tax as well as money borrowed by the Treasury. Why does the Treasury do that? Because Social Security has a trust fund with about $2.6 trillion in IOUs that it can redeem when the payroll tax isn’t covering all the benefits. That’s been the case since 2010.

These IOUs come from excess payroll taxes collected from past workers. That money was exchanged for Treasury bonds—pieces of paper. Treasury then spent these funds on whatever Congress directed: defense, highways, education, you name it. This matters for two reasons. First, unless Congress changes the law, as long as the Trust Fund contains IOUs, Social Security will ask Treasury for money and get it. Second, when the Trust Fund runs out of IOUs around 2033, Social Security benefits by law will be cut by about one-fifth. Something similar happens with Medicare, only sooner.

Long before the Social Security and Medicare trust funds run dry, benefits are going to be cut. What makes that bare fact so tragic and stupid is that it’s entirely avoidable. But the very first thing that needs to happen is for Democrats — and especially the president of the United States — to stop using those programs as a political weapon to scare senior citizens and portray Republicans as heartless monsters for wanting to fix them.