A well-known legend asserts that ostriches bury their heads in sand when threatened. That same behavior is commonly practiced by Americans when confronted by the realities of a rapidly expanding national debt and the expanding costs of Social Security and Medicare.
Despite claims by liberals to the contrary, no plans to reform the entitlement programs will result in throwing granny over the cliff.
Younger Americans, however, should take notice: Change is necessary, and it is coming.
U.S. Sen. Bob Corker, R-Tenn., hopes to lead that change by attempting to alter our ostrich-like behavior while ensuring granny’s safety.
A recent article published in the Nashville Tennessean points out that Corker will soon propose to increase the eligibility age for Medicare from 65 to 67 by 2027 and increase the age for full Social Security benefits to 68 by 2050. (Reforms instituted in 1983 are already raising the eligibility age for full Social Security benefits from 65 to 67 by 2022, the report noted.)
According to a Jan. 8 news release, Corker will also seek to reform Social Security and Medicare by introducing legislation that will limit yearly cost-of-living increases in Social Security payments and cap Medicare benefits for those with higher incomes.
Corker’s news release offers few specifics. However, a 2011 Heritage Foundation reduction plan — which many expect Corker’s plan to echo — proposes reductions in Social Security benefits for retirees with annual incomes of $55,000 (excluding Social Security benefits). The plan also states that seniors with incomes above that level would also be gradually scaled back. Retirees with incomes above $110,000 could potentially lose all benefits.
According to the Heritage plan, a retiree in 2009 with an income of $55,000 collected $14,000 in Social Security benefits per year. Under the new changes, as a senior’s income rises from $55,000 to $110,000, benefits would be reduced from $14,000 to zero. In short, higher income seniors would collect less in Social Security in order to make the program solvent for low-income retirees.
The Heritage Foundation also makes the recommendation of adjusting Medicare benefits according to age, health costs and income for each senior. Again, under the Heritage model, benefits for seniors with incomes ranging from $55,000 to $110,000 would gradually decrease.
While the plan may seem unfair to hard working Americans who pay into the entitlement programs, the reforms may be unavoidable.
An American Enterprise Institute report states that some 56 million Americans receive either Social Security retirement or disability payments, which cost approximately $730 billion per year. In addition, the same report states that Medicare costs Americans roughly $550 billion per year.
With healthcare costs rising, Medicare is expected to soon become more expensive than Social Security. The two programs will continue to incur additional demands as more baby boomers enter retirement.
No matter how good Corker’s efforts are to reform both programs, they likely will not be enough by themselves to balance the books. The combination of more Americans entering retirement as birth rates decline — thus limiting revenues that fund both programs — mean future generations must accept that additional cuts are looming.
All Americans hope our nation will regain a healthy economic footing after decades of deficit spending and fallout from the 2008 financial crisis caused us to lose our balance and stumble.
That eventual recovery will leave Americans to face a new economic reality requiring us to massively overhaul our Social Security and Medicare programs or face economic ruin. As a result, it’s time for all of us to get out heads out of the sand and realize that entitlement reforms have just begun.