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Entitlements crisis? No problem, just raise taxes

Examiner Editorial
-
May 16, 2009

There was a misleading theme in the reporting of the annual trustees report on Social Security and Medicare earlier this week. The theme is seen in New York Times headline that said “Recession drains Social Security and Medicare.” Ditto the Reuters head saying “Recession hurts Social Security and Medicare” and the CNN.com headline proclaiming that “Recession hits Social Security hard.” These heads tell only a small part of the story. The trustees said the reduced government tax revenues and increased demand for benefits occasioned by the recession accelerated the pace by which both major entitlements are heading towards bankruptcy. But the pell-mell rush to the day when the government can’t pay for all the Social Security and Medicare benefits it has promised began long before the current recession. The trustees report was signed by Treasury Secretary Tim Geithner, Health and Human Services Secretary Kathleen Sebellius and Labor Secretary Hilda Solis, none of whom is in any hurry to give aid and comfort to critics who point to decades of excessive government spending on benefits and promises as the root cause of the looming entitlements crisis.
 
As things now stand, according to the trustees, Medicare’s Part A will run out of money for reimbursing hospitals for elderly care in 2017, while the Social Security shelf goes bare in 2037. Spending on the two programs exceeded $1 trillion last year and is now increasing at an annual rate that will double it in 2050. With Barack Obama determined to add trillions in new health care and social welfare spending, there is simply no way – short of slashing benefits for the old and infirm - for the government to generate sufficient revenues to cover its promises without massive tax increases on productive, working Americans.
 
The situation is actually more dire than suggested by the trustees report. The trustees say the crisis in Social Security can be delayed by turning to “trust fund assets.” Those are those mythical IOUs in the Social Security “lockbox.” To understand why those assets are meaningless, just imagine a family that borrows from its IRA to pay everyday living expenses, while writing IOUs to itself to cover the transfers. The family’s IOUs are worthless when retirement day comes, just as the Social Security lockbox IOUs will be.
 
Medicare’s situation is even more serious. Part B, which covers doctors and outpatient care, and Part D, the prescription drug program, are already totally dependent on general tax revenues, to the tune of $179 billion last year. Curiously, the trustees are unconcerned by these facts because “current law automatically provides financing each year to meet next year’s expected costs.” In other words, Washington can always raise taxes to cover increased benefits.
 
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Reader Comments

All comments on this page are subject to our Terms of Use and do not necessarily reflect the views of the Examiner or its staff. Comment box is limited to 250 words.

CSI

May 17, 2009

Always was and always been the
Modis Operandi aka MO

 

Nextaxpro

May 17, 2009

It's not raising taxes per se. It is the Federal reserve printing money out of nothing and charging our government interest. This is such an enormous fraud that the human mind cannot take it all in. The human mind cannot conceive of a billion, much less ONE THOUSAND TIMES THAT; THEN 10.6 TIMES that. Inflation is a hidden tax. The American people sold themselves down the river when they did not demand Congressman Ron Paul be given a voice in the lying, liberal media. Ron Paul would abolish the fraudulent, unConstitutional Federal reserve. He would also ensure gold as a backing for our currency. Our currency is worthless and has been since Feb 3, 1968, when the remaining 25% of gold backing for every $ printed was removed. The Federal reserve rapes you. It doesn't protect you.

 


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