Gov. Mike Huckabee has seized the no-changes-to-entitlements mantle from among the Republican wannabes and he’s set to run on it, aligning himself with people like Elizabeth Warren.
Politically, this is not such a dumb idea. There are a lot of seniors, including conservatives, who are understandably worried about their potential lack of gold to fund their Golden Years and fear changes to Medicare and Social Security. A barnstorming populist like Huckabee is particularly well suited to take the issue to his more buttoned-down rivals in the GOP.
“Let them end their own congressional pensions, not your Social Security!” Huckabee thundered Tuesday as he announced his candidacy. Washington, he said in a video, “has done enough lying and stealing. I’ll never rob seniors of what our government promised them and even forced them to pay for.”
Huckabee, as a matter of principle, is right. Government has promised these benefits and now can’t pay them. But that’s also the problem. The government can’t pay its obligations. It made promises it couldn’t keep. Because that’s what government does.
The latest estimate of the 75-year unfunded obligation for Medicare and Social Security is about $50 trillion.
Now, let’s make this clear. That’s not the the government’s total obligation. That’s its unfunded obligation. It’s money it is supposed to pay out, but for which it hasn’t even assessed taxes or found spending cuts to get the cash.
THERE IS NO MONEY, HUCK.
People talk about when Social Security and Medicare will be bankrupt. I have some news. THEY ARE BANKRUPT RIGHT NOW. What else would you call a business running a $352 billion shortfall every year?
Those projected “bankruptcy” dates you hear about are accounting illusions. They presuppose that there are actually “Trust Funds” now being “tapped” to pay beneficiaries. But the Trust Funds, as you may know, don’t exist. The government collected your Social Security and Medicare taxes and spent it on other stuff. And now the Social Security and Medicare taxes it brings in aren’t enough, so it must plunder the General Fund that’s supposed to be for regular government spending.
According to the Medicare and Social Security Trustees:
The total General Fund requirements for Social Security and Medicare in 2014 are $352 billion, or 2.0 percent of GDP. Redemption of trust fund bonds, interest paid on those bonds, and transfers from the General Fund provide no new net income to the Treasury, which must finance these payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.
The annual deficit for Social Security alone, at $77 billion, is less than Medicare, but will rise quickly:
The Trustees project that this annual cash-flow deficit will average about $77 billion between 2014 and 2018 before rising steeply as income growth slows to its sustainable trend rate after the economic recovery is complete while the number of beneficiaries continues to grow at a substantially faster rate than the number of covered workers.
Nobody is realistically proposing taking benefits from current or even near retirees. But if the programs are to be saved, cuts to benefits for future wealthier retirees and an eventual increase in the retirement age, among other reforms, must occur. Otherwise, benefits for all will have to be cut, for rich and poor alike. That’s where Huckabee’s rhetoric is leading.
Because the money isn’t there. And every year we wait, as we have done under President Obama, the long-term shortfall gets worse.
Yes, it is breaking a promise to those who have contributed even a dime. It is not, however, as is sometimes suggested, taking people’s actual money away, since Social Security and Medicare are not savings programs. Your contributions fund current retirees, not yourself, and that’s the way it’s always been. If you are retired, current workers are funding you. So call your kids and thank them.
What entitlement reform does is try to set up a plan where those who can most afford the cuts get them. Because benefit cuts will have to happen. Unless retirees want payments as fictitious as the Trust Funds.