Solving Social Security and Medicare

From Newsweek.com

Unfortunately, the Medicare and Social Security trust funds won't be exhausted until 2017 and 2037, respectively, by the latest projections. Although these bankruptcy dates are advanced from last year's estimates (2019 for Medicare and 2041 for Social Security), they're still fairly distant. Between now and then, the drain on the rest of government will occur invisibly. The inadequate trust funds will steadily diminish. The government bonds in these trust accounts will be presented to the Treas-ury for payment. Those payments can be financed in only three ways: bigger deficits, higher taxes or spending cuts.

But without a forcing event—something requiring a response—presidents and Congresses sidestep the underlying choices. They profess concern, but their proposals are cosmetic, ineffectual or both. "We must save Social Security for the 21st century," proclaimed Bill Clinton. "The system … on its current path is headed toward bankruptcy," warned George W. Bush. Now Barack Obama seems to be following suit.

"What we have done is kicked this can down the road," he told The Washington Post. "We are now at the end of the road and are not in a position to kick it any further." Great rhetoric—but that's all. Although no one expects Obama to have a grand blueprint after just four months, he has yet to signal even general support for needed policies: gradual increases in eligibility ages; gradual benefit reductions for wealthier retirees; a fundamental overhaul of Medicare. Indeed, Obama's plans to expand government-paid health insurance might increase Medicare spending by aggravating medical inflation.

Like General Motors and Chrysler, we continue self-defeating habits because we can—temporarily. These are not easy issues. But procrastination is a bad policy. The longer changes are postponed, the more wrenching they will be. The hurt for retirees and taxpayers alike will only grow with time. Social Security last faced a forcing event in 1983, when a dwindling trust fund prodded Congress to make changes. The counterintuitive lesson: a "crisis" is just what we need.