Monday, February 19, 2018
Opinion

Column: Trust fund madness

The annual trustees' reports for Social Security and Medicare — the 2013 editions have just been released — are supposed to keep the public well informed about these popular programs. In reality, they do just the opposite: They confuse and mislead. Worse, they allow politicians to duck the hard issues surrounding both programs. What we ought to be debating is how much spending on retirees will dominate government. Instead, we focus on the actuarial soundness of the trust funds, a baffling subject only tangentially related to the basic choices facing the country. The trust funds should be abolished.

In the public mind, the trust funds suggest that Social Security and Medicare are quarantined from the rest of government. As long as the funds remain solvent, promised benefits can be paid. So policy focuses on strengthening the trust funds. Against that background, it was inevitable that the trustees' latest reports would be cast as good news. Slower-than-expected increases in health costs have extended the life of the Medicare trust fund until 2026, two years later than last year's estimate. The Social Security trust fund is projected to pay promised benefits through 2033, the same as last year. This seems comfortably distant.

Headlines were upbeat. "Medicare's future appears brighter," said the Washington Post. The New York Times was almost identical: "Report Shows Better Outlook for Medicare."

Be skeptical.

Dive into the reports — prepared mainly by Social Security's and Medicare's actuaries — and there's precious little cause for optimism. As the baby boom ages, the costs of these programs will mushroom. Millions of Americans believe that Social Security is a stand-alone program whose spending is covered by the payroll taxes cascading into the trust fund. Many others, though fewer, think the same of Medicare. Neither assumption is true.

Here's what we learn from table V.F1 on page 225 of the Medicare report. In fiscal 2012, Social Security and Medicare benefits totaled $1.323 trillion. Payroll taxes, Medicare premiums and other fees came to $920 billion. On a cash-flow basis, this left a deficit of $403 billion, $243 billion for Medicare and $160 billion for Social Security. The deficit had to be covered by general revenues from the Treasury and represented 37 percent of the overall 2012 federal deficit of $1.087 trillion.

The numbers debunk the notion that Social Security and/or Medicare don't affect the deficit. Payroll taxes cover only some of their spending. This has long been true of Medicare; now it's also true of Social Security. All the mumbo jumbo about trust fund balances (which are, in an accounting sense, boosted by interest credited to them by the Treasury) obscures this. Choices exist. A dollar spent on Social Security or Medicare can't be spent on border control, highways, school lunches, financial regulation, military readiness or the Forest Service. A dollar in taxes to support Security or Medicare can't be used for other purposes.

The prospect is for much more of the same. Go to table V.F2, which projects the outlook for Social Security and Medicare over the next 75 years. In that period, the actuaries estimate that payroll taxes, Medicare premiums and other dedicated taxes and fees will total $73.2 trillion. Unfortunately, projected spending is more than 50 percent greater at $112.8 trillion. Somehow, the gap will have to be closed by squeezing other programs, raising taxes, borrowing or cutting Social Security and Medicare benefits. (All these estimates reflect "present value," with future dollars converted into their worth today.)

Well, couldn't the health spending slowdown rescue us? Maybe. After surprising many experts, it might continue to surprise. But Medicare's actuaries think that the opposite is more likely: Projected health spending will understate costs.

One unrealistic assumption is that Congress will reduce doctors' Medicare reimbursement rates by 24.7 percent in 2014. That's "implausible," writes Paul Spitalnic, Medicare's acting chief actuary, in an appendix to the report. Congress has repeatedly overridden similar cuts in the past. Likewise, the projections include lower Medicare reimbursements for hospitals and other providers mandated by the Affordable Care Act. Spitalnic also thinks these are unrealistic and ultimately likely to be overturned by Congress.

"The financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations," he writes.

We need to modernize Social Security and Medicare to reflect longer life expectancy, the growing economic wealth of the elderly, health care's high costs and the burden these programs impose on the rest of society. The obsession with the solvency of the trust funds is a madness that bewilders the public and distracts attention from the larger issues. Of course, the trust funds won't be abolished, precisely because the political class doesn't want to face the larger issues.

© 2013 Washington Post Writers Group

Comments
Editorial: Trumpís rising deficits and misplaced priorities

Editorial: Trumpís rising deficits and misplaced priorities

Itís not popular in Washington or virtually anywhere else these days to express concern about the rising federal deficit. Congressional Republicans who used to be deficit hawks first voted to cut taxes by $1.5 trillion over the next decade, then rais...
Published: 02/17/18
Editorial: Buckhorn should not appeal verdict in firefighterís case

Editorial: Buckhorn should not appeal verdict in firefighterís case

The city of Tampa should have taken Tanja Vidovic seriously from the start when the Tampa firefighter complained about her treatment in the workplace. Now that a jury and judge have spoken, itís time for City Hall to cut its losses, learn from its mi...
Published: 02/15/18
Updated: 02/16/18
Editorial: CareerSource troubles mount as public trust drops

Editorial: CareerSource troubles mount as public trust drops

The dark cloud enveloping Tampa Bayís job placement centers keeps growing. There are accusations of forged documents, evidence of nepotism and concerns about grossly inflated performance numbers that could be tied to receiving more public money and b...
Published: 02/15/18
Updated: 02/16/18
Editorials: Prayers and platitudes after shootings arenít enough

Editorials: Prayers and platitudes after shootings arenít enough

Even before the victims of another mass shooting at another public school were identified, Gov. Rick Scott, Attorney General Pam Bondi, state legislators and members of Congress rushed to South Florida or to social media to offer their thoughts and p...
Published: 02/15/18
Editorial: DCF review should get to the bottom of Hillsborough foster care issues

Editorial: DCF review should get to the bottom of Hillsborough foster care issues

The Florida Department of Children and Families is right to call for a timely and "comprehensive" review of Hillsborough Countyís foster care system. Though the probe is a reaction to a recent case involving a child who was left unattended, the revie...
Published: 02/14/18

A Washington Post editorial: Modernize 911 calling before it becomes an emergency

This Friday marks the 50th anniversary of the first 911 emergency call placed in the United States. Since then, uncounted lives have been saved and people helped. It has been a great accomplishment of government.But even as an estimated 240 million 9...
Published: 02/13/18
Updated: 02/14/18
Editorial: Scott, Cabinet cannot be trusted on felonsí voting rights

Editorial: Scott, Cabinet cannot be trusted on felonsí voting rights

Gov. Rick Scott always has been grudging and imperious about restoring the voting rights of felons, requiring them to wait for years before begging the governor and Cabinet to be recognized again as citizens. That arrogance is on full display in a le...
Published: 02/13/18
Another voice: ĎDreamersí donít know whom to trust on immigration

Another voice: ĎDreamersí donít know whom to trust on immigration

Immigrants brought into this country illegally as children by their parents may be wondering whom to trust. The political theater being played out in Washington hasnít settled the status of either the "Dreamers" or the estimated 11 million other undo...
Published: 02/13/18
Editorial: Promising Tampa stadium site for Rays

Editorial: Promising Tampa stadium site for Rays

While it came as little surprise, the Tampa Bay Raysí selection of an Ybor City site near Tampaís Channel District as the best spot for a new stadium is an important milestone in the effort to keep Major League Baseball. Now comes the hard work of de...
Published: 02/09/18
Editorial: Senate should reject Houseís attack on public schools

Editorial: Senate should reject Houseís attack on public schools

After pummeling public education so soundly last year, itís little surprise Republican state legislators are mounting another attack on public schools, teachers and local districts. The mammoth education bill passed by the House last week is loaded w...
Published: 02/08/18
Updated: 02/13/18