Members of Congress are notorious for not thinking much beyond the next election. But a looming crisis with federal spending demands that Congress start dealing now with problems it would rather avoid - such as big tax hikes and cuts in entitlement programs, including heretofore untouchable Social Security.
Past efforts to get a handle on entitlements have faltered and died. Trying to rein in entitlements - Social Security, Medicare, Medicaid and the federal civilian and military retirement system are the biggest - is considered political poison. Congress clearly would prefer to ignore the realities crowding at the door. But that may not be possible much longer.A 32-member Bipartisan Commission on Entitlement and Tax Reform headed by Sen. Robert Kerrey, D-Neb., is due to issue an interim report next Monday in an attempt to define the problem. But the outlines already are clear.
Consider the following:
- Unless something is changed - drastically changed - entitlements and the interest on the national debt will be using all federal revenues by the year 2012, leaving nothing for defense, federal salaries, law enforcement, disaster relief, or anything else.
- Financing entitlements in their present form would require a 50 percent increase in all federal taxes, an impossibility since that would probably bring the economy to a halt.
- Using deficit financing also would not work since the yearly budget shortfall would quickly dwarf even the biggest deficits of recent years. Interest on the national debt would soon consume all the federal revenue.
- The current generation of Americans in their 60s may be the last to collect the full benefits from Social Security.
- At the end of the next decade, 78 million baby boomers will start to retire, setting up what one senator called "an economic and social disaster."
- Medicare hospital payments already are more than the revenues for the program, and the trust fund dedicated to the program will run out of money within seven years.
Some combination of higher taxes and reduced benefits is inevitable, including cuts in Social Security. The longer Congress waits to take such painful action, the more drastic the measures will have to be.
Though the Social Security system has been running a large surplus every year, Congress has borrowed the money and spent it, leaving behind a pile of IOUs.
When confronted with the possibility of Social Security cuts, older Americans usually cry, "It's our money. We paid for it." Yet in truth, the average retiree gets back far more than he or she put into the system.
For example, workers with average incomes who retired in 1980 got back their retirement taxes, including the share paid by their employers, plus interest, in less than three years.
Most members of Congress don't want to even think about the financial future and the role of entitlements. Kerrey and his commission already are getting criticized for even bringing up the issue. But Congress and the American people don't have a way to hide from the harsh reality. All those years of deficit spending are starting to come home to roost.