Newswise — Painful but inevitable Social Security and Medicare reforms will be difficult to sell because years of partisan wrangling have clouded the public's grasp of the programs' dire financial problems, a former government economic adviser warns.
University of Illinois finance professor Jeffrey R. Brown hopes this week's report that both programs will run out of money sooner than previously thought will help cut through confusion over the fiscal outlook of the federal retirement and health-care systems.
He blames years of political rancor, including a 2005 standoff during which Democrats sank reforms proposed by President Bush, arguing that his forecast of a funding crisis was fabricated and that both systems would be financially sound for decades. Many Republicans contributed, too, saying the problem was real but could be solved relatively painlessly by allowing people to invest their contributions in the stock market.
"So on one hand, the public hears all of these daunting reports about the need to reform these programs, but on the other hand they hear political leaders saying this is a phony crisis and everything will be fine, or that the problem is real but painless to fix," said Brown, a former member of the bipartisan Social Security Advisory Board. "Neither of those positions is tenable."
Brown warns that the challenge is real and worsening, and suggests the U.S. follow Britain's lead by mounting an extensive public awareness campaign to clear up confusion and make a case for change.
"I think there needs to be a credible, bipartisan public education process," said Brown, whose nomination last year as a trustee for Social Security and Medicare lapsed because the Senate failed to act before the 110th Congress adjourned in January. "Set partisanship aside and communicate to people why reform is needed and, more importantly, why reform isn't going to be pain free."
He says raising taxes or reducing the growth of benefits are the only real options to rescue Social Security, which will start running cash deficits in 2016, and Medicare, which already is outspending the taxes dedicated to the program, based on a new forecast released this week.
"There's really no magic bullet solution," said Brown, who served on the staff of the President's Commission to Strengthen Social Security in 2001. "The closest thing we have to a third alternative would be finding ways to keep people in the workforce longer, but even with that we're going to have to make some hard choices."
Raising eligibility ages would add to the years workers contribute to Social Security and Medicare, and reduce the years they collect, which would mitigate tax increases or benefit cuts needed to shore up the programs, he said.
Though unpopular, the move would be in line with the programs' goal of keeping older Americans out of poverty, said Brown, the director of the Center on Business and Public Policy in the U. of I. College of Business.
"There's a huge difference in life expectancy from when these programs were created to today," he said. "So maybe we need to think about partially indexing the benefit eligibility age to increases in life expectancy."
Brown says long-needed reforms have languished because of the fear of political backlash and because the dates of the programs' projected insolvency once seemed far off.
But he says the latest report is cause for urgency, forecasting that Social Security will for the first time pay out more in benefits than it collects in taxes by 2016.
"It's now within the time horizon that this administration ought to be concerned about," Brown said. "If this president serves two terms, we will have reached the point before he leaves office where Social Security is no longer helping plug deficits elsewhere in government, but instead will be contributing to those deficits."
He urged government to act quickly, comparing the situation to a worker who starts saving for retirement at age 25 instead of 60.
"It's one of those things where the longer you wait, the harder it gets and the deeper the hole," Brown said. "The earlier you start, the less painful the changes that need to be made."
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