Social Security and Medicare due for annual financial checkup
WASHINGTON (AP) _ Prospects appear dim that President Bush will win significant changes in either Social Security or Medicare in his second term after his major effort to overhaul Social Security stalled in Congress last year.
But the debate was certain to be revived after the trustees of Social Security and Medicare provided their annual update Monday of the financial health of the government's two biggest benefit programs.
Last year's report put the date that Social Security would exhaust all the resources in its trust fund at 2041, a year earlier than previously estimated. The Medicare trust fund, the trustees estimated last year, will be depleted in 2020.
The more significant date, in terms of the impact on the budget, occurs much earlier _ the date that both programs start paying out more in benefits than they collect in tax revenues.
For Medicare, that threshold was crossed in 2004. For Social Security, the trustees estimated last year that the point where annual payments will exceed tax collections will occur in 2017, a year earlier than had been estimated.
Analysts said they expect any date changes in this year's report to be small, with the message unchanged: Both programs face massive funding shortfalls that will only grow worse with the approaching retirement of 78 million baby boomers.
Bush urged Congress to address the problem last year with the creation of private savings accounts for younger workers. Democrats countered that the effort was masking his real intent _ to fix the insolvency problem by cutting benefits for higher-income workers.
Bush's Social Security proposal, which he had called the top domestic priority of his second term, has gone nowhere in Congress, with even Republicans afraid to back it.
The prospects of reviving the proposal or any other major effort to deal with the two entitlement programs does not look promising given that this is an election year and Bush, facing the lowest approval ratings of his presidency, has other problems to deal with, from the Iraq war to soaring gasoline prices.
``As a lame duck administration, it is very hard to get anything as major as this through Congress,'' said David Wyss, chief economist of Standard & Poor's in New York.
Some analysts said even a new president may shy away from tackling entitlement reform, given that any solution will require making painful political choices _ either cutting benefits, increasing taxes or doing a combination of the two.
``There is no magic here,'' said Mark Zandi, chief economist at Moody's Economy.com. ``If there is no change in policy, there is no reason to think things are going to get any better.''
Federal Reserve Chairman Ben Bernanke, testifying to Congress last week, took up where his predecessor Alan Greenspan left off, urging lawmakers not to delay making the changes needed to make sure that the programs can be financed.
He noted that under current projections, Social Security, Medicare and Medicaid, which provides health services to the poor, will consume an amount equal to 16 percent of the total economy by 2040, double what they do now.
Bernanke said hard choices will be needed to avoid ``eventually unsustainable budget deficits.'' But the idea that any of this will come together quickly seems far-fetched given the current political environment.
Bush even had to resort to waiting until Congress left town to make recess appointments to fill the two spots for members of the public on the six-member board of trustees because members of the Senate had blocked his two choices.
Bush reappointed Thomas R. Saving of Texas, who has been a proponent of Bush's proposal to create private savings accounts, and John Palmer of New York.
That prompted Senate Finance Committee Chairman Charles Grassley, R-Iowa, and Montana Sen. Max Baucus, the panel's top Democrat, to say Friday they would introduce legislation to prohibit a public trustee from serving more than one four-year term. They argued a fresh perspective is needed.
Many private analysts say a major fix for Social Security and Medicare will not occur until the system faces an imminent crisis. They point to the 1983 Greenspan commission that was able to strike a deal to boost taxes and cut benefits to keep Social Security solvent during the Reagan administration.
``Any solution will have to be bipartisan so that one party will not be able to demonize the other one,'' said Jason Furman, a senior fellow at the Center on Budget and Policy Policies, a liberal Washington think tank.