August 20, 2008

August 20, 2008 | Commentary on Social Security, Medicare

Social Security and Medicare Reform: Grading the Wisconsin Congressional Delegation's Proposals

 On July 13, the Journal Sentinel opened its pages to Wisconsin's congressional delegation. Each member weighed in on how he or she would solve the long-term Social Security and Medicare funding shortfall.

As the only Wisconsinite (born and raised in Appleton) sharing the podium with David Walker on the Fiscal Wake-up Tour, I've taken the liberty of grading each lawmaker's response. But first, let's review the nature and size of the entitlement problem.

Much of what drives the problem is simple demographics. In 1960, five workers paid the taxes for each retiree's Social Security and Medicare benefits. Today that ratio is just 3-to-1. The retirement of 77 million baby boomers will drive that ratio down to 2-to-1 by 2030. That means every two children born this year will have to support themselves, their families and the Social Security and Medicare benefits of their very own retiree. The cost will be staggering.

But demographics are only part of the story. Rising health care costs put Medicare in even worse shape than Social Security. Overall, Social Security and Medicare face a combined 75-year deficit of $43 trillion. That's trillion with a "t."

Unless these entitlements are reformed, paying all promised benefits would require: 1) doubling all tax rates; 2) eliminating every other federal program, including defense and education; or 3) running massive budget deficits that eventually would collapse the economy. And every year of delay raises the final cost of reform by trillions of dollars.

Yet delay is all we are getting from Congress. Thankfully, the Journal Sentinel asked Wisconsin's elected officials to confront this issue and offer their solutions. While some lawmakers passed the test, others failed to offer much beyond rhetoric.

Rep. Paul Ryan (R-Janesville) gave the most detailed response. In fact, Ryan is the only member of Congress to introduce comprehensive legislation to solve the entire long-term shortfall. It is not a painless proposal - it would redesign federal health, retirement and tax policy - but it protects benefits for those who need them without taxing the next generation into bankruptcy. Agree or disagree with the plan itself, Ryan deserves credit for being the only lawmaker offering one. Grade: A

Rep. Tammy Baldwin (D-Madison) and Rep. Ron Kind (D-La Crosse) both endorsed legislation creating a bipartisan entitlements commission that would propose a long-term fix and then require that Congress vote on that proposal. While neither lawmaker indicated which reforms he or she would like to see in such a package, the commission is a good start. Grades: B

Sen. Russ Feingold (D-Middleton), Rep. Jim Sensenbrenner (R-Menominee Falls), and Rep. Tom Petri (R-Fond du Lac) all strongly articulated the need for reform. Feingold focused on the need to slow rising Medicare costs, Sensenbrenner called on Congress to put politics aside and address the issue and Petri summarized the problem and several known proposals. However, none of the lawmakers endorsed specific proposals that would sufficiently close the fiscal gap. Grades: B-

Sen. Herb Kohl (D-Milwaukee) displayed a poor understanding of the issue. After understating the size of the Medicare funding shortfall by $25 trillion, he incorrectly asserted that the Social Security Trust Fund will solve the program's funding problem (Congress already spent the trust fund, leaving only IOUs that must be repaid in new taxes). Kohl failed to endorse any Social Security solution, and his Medicare proposal of promoting generic drugs would not close more than a small fraction of the long-term gap. Grade: D+

Rep. Gwen Moore (D-Milwaukee) criticized the 2001 and 2003 tax cuts (though repeal would close only 10% of the long-term fiscal gap) and Iraq spending (which is just 3% as large as the entitlement unfunded liability). Only then did she address entitlements by vaguely calling for health care reform - without naming a single specific idea. Grade: D

Rep. David Obey (D-Wausau) expressed more concern over the $1 trillion spent in Iraq than Social Security and Medicare's $43 trillion liability. Obey downplayed the entitlement funding challenge, called reform advocates "chicken littles" and then proposed universal health care - which would deepen the fiscal hole - before punting all responsibility to solve the entitlement problem to the next president. Not exactly a profile in courage. Grade: D

Rep. Steve Kagen (D-Appleton) gave the most bizarre response of all. Asked how to solve Social Security and Medicare's deficits, he ignored the question and instead recited unrelated talking points on energy independence, oil drilling and health care accessibility. Kagen's response failed to display even an elementary understanding of Social Security and Medicare reform. Grade: F

Reforming Social Security and Medicare will not be easy or painless, but delay only worsens the problem. It is time for lawmakers to drop the platitudes and tackle reform. The American people are ready for this debate.

Brian M. Riedl is Grover M. Hermann Fellow in Federal Budgetary Affairs in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

About the Author

Brian M. Riedl Grover Hermann Fellow in Federal Budgetary Affairs
Thomas A. Roe Institute for Economic Policy Studies

First appeared in The Milwaukee Journal-Sentinel