Earlier this week, the Annual Social Security and Medicare Reports were issued. They were over two months late, and without the concurrence of two public trustees. That’s because two public trustee positions have been vacant for over ten years.
The reports project that the Social Security Old Age and Survivors (OASI) Trust Fund will be exhausted in late 2032. The Medicare Hospital Insurance Trust Fund (Part A) isn’t in much better shape. It is expected to become exhausted in 2033. If that happens, Social Security OASI benefits are projected to be cut 22% across the board and Medicare Part A reimbursements are expected to be cut 11% across the board.
As it turns out, this story has been going on for some time. Indeed, Congress has kicked the fiscal can down the road for many years. The fiscal time bomb is enormous and growing, with Social Security accounting for 22% of federal spending and Medicare accounting for 14%. On top of that, interest payments now account for 14% of federal spending. Add that to Social Security and Medicare, and these three mandatory categories alone consume half of all federal spending.
America has arrived at this point because of the massive erosion of what was a fiscal constitution. Prior to the Great Depression, the federal budget was constrained by two fiscal rules. The first were formal limits embedded in the U.S. Constitution that enumerated specific spending powers. The second was an informal rule that the government could borrow, but only during recessions and wars. Those two fiscal constraints are long gone.
On its 250th anniversary, it is time to reintroduce fiscal sanity in America. A fiscal commission should be established that learns from the lessons of history. Indeed, Congress should pass legislation creating a statutory fiscal commission tasked with producing two separate sets of recommendations. Each set would be guaranteed an up-or-down, yes-or-no, vote in Congress.
The first set of recommendations would be dedicated to restoring the solvency and sustainability of Social Security. The second set would address the means to put the broader budget on a sustainable path.
Separating the two sets of recommendations is essential. Under Senate rules, Social Security reform cannot move through budget reconciliation. As a result, it could be filibustered. The broader debt package could move through reconciliation and could not be filibustered. As a result, it is desirable to put the two sets of recommendations on separate tracks, so a potential filibuster on Social Security reform could not sink the broader effort to put the budget back on a sustainable basis.
A workable vehicle for such a commission already exists. The bipartisan Fiscal Commission Act (H.R. 3289), introduced by lead sponsor Representative Bill Huizenga (R-MI) alongside lead original cosponsor Representative Scott Peters (D-CA), has been endorsed by the House Problem Solvers Caucus and a number of fiscal watchdog organizations. It provides a solid launch pad.
The sobering Social Security and Medicare reports of yesterday clearly show that a fiscal time bomb is ticking. It is time to defuse it.
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