Reclaiming Common Sense

The talking heads who come into our living rooms and family rooms are talking about an entitlement crisis. They are talking about the economic viability of Medicare and Medicaid,  Social Security, and the Highway Trust Funds. President Reagan discussed the necessity of Democrats and Republicans coming together to save Social Security on April 20, 1983.  The increase in the social security tax was supposed to raise 2.7 trillion dollars and provide long-term stability to the Trust Fund.  The parallel website to this column, Reclaiming Common Sense, spent time, energy, and effort attempting to illuminate its readers to the truth that the government has been projecting the necessity to raise taxes in order to avoid default on Social Security and on Medicare/Medicaid. The increases in the social security tax were recorded in a column written July 30, 2014. This same column points out the situation that the people at Health and Human Services are requited to provide a report to Congress by April 30th of each year accounting for expenditures and revenue as a result of a clause in the Patient Protection and Affordable Care Act, Obamacare. A call to action for a report on Medicare and Medicaid was made April 28, 2015. Quite frankly, the report that was supposed to be released  April 30,2016 was released so late, June 22, 2016, that this column did not cover its release. Obamacare has caused a ballooning of Medicare and Medicaid enrollment. The Old Age Survivors and Disability Insurance Trust Fund (Social Security) released its Trustees Report on the same day.

The questions that need to be answered are:

  • How many people are going to require Trust Fund Benefits?
  • How much will medical care costs and living expenses increase?
  • How long will people live?
  • If Medicare/Medicaid and Social Security are self funding are they on-budget or off-budget?i

The Social Security trust fund is projecting 50 million people on Social Security (OASI) and another 10.8 million on SSDI for 2016. Those numbers should rise to 56.5 million and 11.2 million respectively by 2020. It was projected that we might have 58 million on OASI and 11.7 million on SSDI as recently as 2013.  The number of people projected for Medicare/Medicaid during 2016 was projected at 57.3 million during 2013 is now 57.1 million as of the 2016 report. We know that some people are working longer, as of the January Jobs Report. If people have jobs that provide health care or if they earn too much to receive Medicare and Medicaid benefits then they may not be requesting benefits.

Medical Care Costs are accelerating faster than anticipated. There are projecting CPI-W inflation of 2.00% to 3.2%. The problem is that the most recent CPI reports have pegged the rate of of Medical Inflation of 3.6% for Medical Care Services and 4.8% for health insurance . Medicare Part B premiums increased from $104.90 to $121.80 during 2015. It was projected to rise to $149.00 for the fiscal year 2016.

How Long will people live? A recent study out of the University of North Carolina reported a decline in the average life expectancy from 76.5 years to 76.3 years. This was the first time in many years that the life expectancy rate fell.

The real question behind this column is - If the Medicare Trust Fund and the Social Security Trust Fund are "off-budget" why are they used to offset deficits? The January Treasury Reportincluded, as it "always does," Social Insurance and Retirement  Receipts, both on-budget and off-budget as part of the revenue received during the month. A prior article  on the Reclaiming Common Sense site was "What is a Federal Shadow Account" from April of 2014.The government has been "borrowing" surpluses on the Trust Accounts and the Interest on the Trust Accounts.

Robbing Peter's IRA  to Pay Paul Now. The 2016 Trustee account for OASI clearly states that the SSDI is going to be unable to pay full disbursements as of 2023. OASI will not bee fully funded as of 2035. It also states that the amount of money going into the OASI account is being reduced to cover on-going shortages in the SSDI program.  Medicare Hospital Insurance is scheduled to be unable to fully fund its obligations as of 2028. The Social Security Trust Fund and the Medicare Medicaid Trust Fund  were set up to fund themselves for decades into the future. They are supposed to act as an investment vehicle that earns interest and does not withdraw more than is paid into it during the course of a year.  The Trust Funds were, in effect, the  Investment Retirement Accounts (IRAs.)

Social Security and Medicare are not "entitlements"  as they are portrayed in the media. Entitlements tend to have a negative connotations as do food stamps and welfare. Those of us who have paid into the accounts are enabled to withdraw money from those accounts when we are of age or need.  They are not entitlements - they are enablements.  If the Trust funds are truly "off-budget" then we have to treat them that way. We have to change the accounting system and reflect what the real debt is.

We Owe - We Owe - It's off to work we have to go. The 2016 Medicare report estimates that the Trust Fund is underfunded by 3.9 trillion dollars. It is estimated in the 2016 OASI report that social security is underfunded by 11.4 trillion dollars. In order to make up the shortfall of 11.4 trillion dollars the social security tax would have to be boosted by 2.54% The Social Security tax was 12.48% during 2015 and 12.44% during 2016. This means that we would pay 14.98% for Social Security taxes. The current Medicare Tax is 2.90%. As of 2013 those who earn over 200,000 a year pay a surcharge of 0.9%. There was a proposal to immediately and permanently raise the Medicare tax from 2.90% to 3.8% with the release of the 2015 Trustees Report (pg. 30.) The 2016 Trustees report suggested an increase to 3.63% (pg. 30.)

The 18.61% solution. We need to pay 18.61% starting immediately in order to pay for both Medicare HI,  Social Security, and SSDI.... or we can stop raiding the piggy bank. A column was written during October of 2013 titled "Ronald Reagan and the Great  Social Security Heist" by Allen W. Smith, Ph.D that detailed how Social Security was saved by Ronald Reagan only to have Congress raid the additional taxes to pay for other projects and reduce the structural deficits.

We have  serious problems. People are working more part-time jobs and fewer full-time jobs than July 2007. Part-time jobs do not pay as well as full-time jobs, as a rule. If we aren't getting paid as well then we aren't paying as much as we would if we were paid more money. We have more people on Medicaid that ever recorded due to the Medicaid expansion of the Affordable Care Act. Obama(s)care is scaring people with higher deductibles, higher premiums, and fewer people being covered if they work for companies with fewer than 50 employees. We have a failure to participateWe have a tax more and spend even more government.  Military sequestration has masked the ballooning of Health and Human Services spending. It is time to take off-budget items out of the Treasury Report. It is time to take state issues out of the federal budget. 

We do not have an entitlement problem, we have a Congressional Spending Problem. We have enablements that we have funded and Congress has raided. Nobody raised any concern as the Federal Debt went from $10 trillion to $12 trillion to $14 trillion to $19.9 trillion under President Obama.  Now as we approach $20 trillion people are saying we have to have offsets - now we have to balance the budget? President Obama was doubly irresponsible and doubly unpatriotic. He built the debt. We may have to raise medicare and social security taxes to save the system(s.)

We will also have to audit spending and the budgeting process. For starts, set 5% of the budget aside to pay down the debt. Our budget should be set on the prior year's income. We aren't allowed to spend more than we receive in taxes and fees. We have to rely on insurance companies to solve disaster problems. We have to have states take responsibility for their infrastructure. We have to get the Federal Government back to basics.

It's the economy.