- The Washington Times - Thursday, June 4, 2009

ANALYSIS/OPINION:

President Obama talks a good game about entitlement reform, but talk is cheap. The annual Medicare and Social Security trustee insolvency predictions, released in May, are a wake-up call that entitlement reform is needed now. Both entitlement programs face serious funding shortfalls.

The latest government estimates show Social Security beginning to pay greater benefits than taxes collected by 2016, a year sooner than projected last year. The so-called trust fund will be depleted by 2037, four years earlier than 2008 predictions.

Medicare is in even worse financial shape, paying out more in benefits than collections for the second year in a row. Medicare’s phony trust fund is now expected to be depleted by 2017, two years earlier than last year’s predictions. With Medicare and Medicaid spending alone projected to increase to almost 9 percent of gross domestic product by 2035, this is where the entitlement-reform effort must begin.

The outlook is even bleaker than the report indicates because government accountants assumed a 21 percent cut in physician payments this year. While required by law, Congress has repeatedly delayed the cost-saving measure in recent years and is expected to do so again in 2009. Further strain has been put on the fiscal situation as tax revenues have fallen in step with the declining state of the economy. This is added to the squeeze already put on revenue as the baby boomers get older and the overall population gets grayer, with increasing numbers of Americans thus receiving more benefits and no longer paying into the system.

The existence of Social Security and Medicare “trust funds” is itself a fallacy because the revenue is all used on general government spending when it is collected. No funds are stashed away in a piggy bank for a rainy day. Growing costs in these entitlements add to the federal deficit like all other government spending. The administration has revised its federal deficit forecasts upward to $1.84 trillion for the year.

After the numbers were announced on May 12, Treasury Secretary Timothy F. Geithner said that the report is a reminder that “the longer we wait to address the long-term solvency of Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be.” The same week, the White House made a spectacle of getting major health care providers to promise to trim costs by $2 trillion during the next decade. That is cold comfort since that promise came without any concrete execution plans.

“What we have done is kicked this can down the road,” Mr. Obama said in January about the need for reforming the spending programs. “We are now at the end of the road and are not in a position to kick it any further. We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else’s.” We agree but so far see no real signs that Mr. Obama is doing anything to fix the budgetary quagmire both programs present. The president and congressional Democrats are proceeding with still-undefined health care reforms. We’re afraid to ask how much that will cost.

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