One of the things we all have missed in the Social Security (SSI) debate is the relative importance of reforming SSI now as opposed to other financial problems our country faces. The President claims SSI is in crisis now and demands action this year. His justification is the projected shortfall in contributions during the next 75 years. His solution is to eviscerate the popular 70 year old program by carving out private accounts, reducing benefits, and borrowing
$4 trillion to finance the transition. Some facts, please.
The Social Security and Medicare Trustees, a majority of whom are members of the President’s cabinet, project that the Social Security shortfall will amount to
0.65 percent of the Gross Domestic Product (the basic measure of the size of the U.S. economy) over the next 75 years. In dollar terms, the Trustees project the shortfall over the 75 year period at
$3.7 trillion.
During his first term, President Bush signed into law legislation that cut individual income tax rates, repealed the estate tax, and reduced taxes on capital gains and dividends. These tax breaks and others, enacted in 2001 and 2003, will expire between the end of this year and 2010. The Administration has called for making these tax breaks permanent, but has not proposed any reduction in spending to offset the cost of extending these tax breaks. Without corresponding spending offsets, the President's proposal would be extremely costly and contribute significantly to the growth of deficits over the long term.
- Making permanent the tax breaks enacted in 2001 and 2003 would have a direct cost of $1.8 trillion through fiscal year 2015, based on Congressional Budget Office estimates. This includes the cost of extending the Alternative Minimum Tax.
- Without offsets, the cost of these tax breaks would increase the annual deficit and thus would add to the federal debt. The interest payments associated with this higher level of debt will be nearly $300 billion through 2015. Consequently, the total cost of the tax breaks, including the related interest costs would be $2.1 trillion over the period.
- Nearly 90 percent of these costs would occur in the second half of the next decade, since most of the tax breaks do not expire until the end of 2010. In 2015, the extended tax breaks alone would cost $376 billion, an amount equal to 1.9 percent of the nation’s economy or Gross Domestic Product in that year.
- The combined cost of the tax breaks enacted since 2001 and the cost of extending the tax breaks would be $5.1 trillion through 2015, when interest costs are included. Of that total, $4.2 trillion would occur in the period between 2006 and 2015
The nation debt is now
$7.7 trillion or
1.3 percent of GDP, more than twice the projected 75 year SSI shortfall. Adding the effects of tax breaks already enacted, from now through 2015 would add $4.2 trillion to our national debt making the total
$12 trillion, or more than
2 percent of GDP. This does not factor in our government's current fiscal policy that keeps piling on debt throughout the next decade, an perhaps several more. The Congrssional Budget Office (CBO) estimates the budget deficit for 2005 at
$539 billion and
$487 billion in 2006. That's
$1.026 trillion in just two years!
The CBO also projects that, under current law, Medicare spending will increase from
2.6 percent of gross domestic product (GDP) in 2004 to
8.3 percent or more in 2050.
So, let's summarize these facts:
- Social Security's projected shortfall over the next 75 years is $3.7 trillion or 0.65 percent of GDP.
- The tax breaks enacted in 2001 and 2003, if made permanent without offsets, would add $4.2 trillion or almost 1 percent of GDP to the national debt in the next 10 years.
- Our national debt right now is already $7.7 trillion or 1.3 percent of GDP and could reach $12 trillion or 2.3 percent of GDP by 2015.
- Medicare, currently costing 2.3 percent of GDP will rise to 8.3 percent of GDP in 45 years.
You're no dummy. . .which one of these four issues is
least urgent and just why is President Bush so adamant about
fixing Social Security and ignoring the others? It's no wonder the President is failing miserably to sell his SSI reform.