February 10, 2023

The last president to reform Social Security was Ronald Reagan.  He formed the Greenspan Commission to formulate solutions to problems the program faced.  Reagan then worked with speaker of the House Tip O’Neill to enact the solutions.  Social Security as we know it would have ended decades ago had he not been successful.

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During the 2022 elections, Democrats claimed that Republicans would “end” Social Security and Medicare if elected.  On January 26, President Biden proclaimed, “Here’s the deal: they want to cut your Social Security and Medicare.”  At the State of the Union address, Biden doubled down, saying, “Republicans want Social Security and Medicare to sunset.”  While Democrats spout malarkey, Social Security and Medicare are in peril.  Action must be taken to bolster these programs, as they are again in jeopardy.

Social Security is divided into two funds: the Old Age Survivors Insurance (OASI) and Disability Insurance (D.I.) funds.  “The OASI Trust Fund reserves are projected to be depleted in 2034, at which time OASI would pay 77 percent of scheduled benefits.  DI Trust Fund asset reserves are not projected to become depleted during the 75-year period ending in 2096.”  Medicare is also divided into two funds: Hospital Insurance (H.I.) and Supplementary Medical Insurance (SMI) trust funds.  “The estimated depletion date for the HI trust fund is 2028.”  Since the government can raise the cost of premiums for participants in the SMI, “it is expected to be adequately funded for the next 10 years and beyond.”

OASI and H.I. are underfunded.  This is not a problem for Republicans or Democrats, but a problem for the hundreds of millions of people who participate in these programs.  Republicans have assured the public they won’t “touch” the programs.  While this may deflect the misinformation perpetuated by Democrats, it doesn’t fix the problem.

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President Reagan was not a supporter of large government programs.  In a 1964 speech, he said, “No government ever reduces itself in size.  So government programs, once launched, never disappear.  Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”  However, by the time Reagan became president, he understood that the program was embedded in the lives of the American people, and he would better serve them by sustaining it.

Reagan accomplished what seems improbable today.  He reached a bipartisan consensus.  The Greenspan Commission consisted of 15 participants from industry and both political parties.  The final agreement was largely negotiated by James Baker, Reagan’s chief of staff, and Robert Ball, a former Social Security commissioner, appointed by Speaker O’Neill (see Baker and Glasser, The Man Who Ran Washington: The Life and Times of James A. Baker III, Doubleday, 2020, p. 193).  Based on the recommendations of the commission, legislation was enacted in 1983 that assured the financial stability of Social Security for 50 years.

Cost of living and tax schedule changes were agreed to.  The plan increased the full retirement age of many participants and included provisions to “tax the benefits of higher-income recipients, expand the pool of contributors by bringing in all new federal employees, require the self-employed to pay the employer share of payroll taxes in addition to the employee share, and transfer money from the general government fund to cover the cost of benefits for military veterans.”

The Social Security trust fund would have been depleted some time in 1983 had this agreement not been reached.  The current situation is not as dire.  Funding for Social Security is secure until 2034, while Medicare’s H.I. fund will be depleted in 2028.  Reforms to properly fund these programs can be pushed out, but not for long.

Political factions have a variety of reasons for inaction.  It’s easier to kick the can down the road than fix the problem.  Nothing is done in Washington until an emergency exists.  Republicans don’t want to increase taxes to pay for Social Security because tax increases will undermine their constituents.  They don’t want to recommend benefit reductions because their proposal will be incorporated into Democrat blather.  Democrats prefer to leave their legacy programs in limbo so they can portray Republicans as destroyers of Social Security and Medicare.

Democrats ignore these programs while spending trillions of dollars on an ever-expanding government.  Democrats knew when they implemented Obamacare that Social Security and Medicare would be a financial burden on taxpayers that would have to be dealt with.  They didn’t care and implemented a program that is estimated by the Congressional Budget Office to cost the American people $1.8 trillion over the next decade.  And $716 billion was siphoned from Medicare to fund Obamacare.  Perhaps Sam Bankman-Fried received training for the shell game he called FTX from Democrat politicians.