Lost in Washington’s political cacophony is the alarming erosion of the financial foundations of Social Security and Medicare. Focused on more immediate crises and reluctant to touch this “third rail” of politics, today’s lawmakers, like many before them, have avoided even discussing the inevitable painful adjustments they will be forced to make.
Whenever Congress shakes off its inertia and begins to take action, it will look to independent analysis of the programs’ finances. That analysis is currently provided by the boards overseeing Social Security and Medicare, but unfortunately, the seats of their two public trustees — who are essential to maintaining public confidence in the findings — have been empty for more than two years. Vacancies like these should always concern those who favor good government and transparency, and they are even more important now, as recent policy developments on taxes, health care and immigration may affect the programs and the millions who rely on them.
Historically, the Social Security and Medicare trustees have earned the public’s trust through the integrity of their annual financial reports. For years, the trustees — four Cabinet-level members of the administration and two public trustees — have concluded that, under current law, Social Security and Medicare finances are unsustainable. Moreover, they have warned that further delays in addressing this situation will mean more drastic corrective policies down the road.
As the most recent public trustees, we know firsthand the importance of their input. These two individuals are required to come from different political parties and are chosen for their independence and expertise. They play a key role in reviewing the methodologies used to develop financial projections for the programs, as well as the economic and demographic assumptions underlying them.
With these positions vacant, the current and the most recent presidential administrations each decided to leave existing methodologies and critical assumptions essentially unchanged. We believe those decisions were appropriate.
However, projections can’t remain static forever, and vacancies shouldn’t last this long. In the coming year, as a new tax plan takes effect and immigration policy hangs in the balance, we need public trustees to weigh in where it matters most:
Economic growth: The trustees’ estimates depend on projections of future economic growth, which must reflect both the latest economic data as well as any major shifts in federal policy, such as recent tax legislation.
Health care cost growth: Projections of general health care cost growth, a major driver of future Medicare costs and take-home wages, must be up-to-date. Currently, the trustees project cost growth to slow due to the Affordable Care Act’s so-called Cadillac tax on high-benefit health care plans. With lawmakers having delayed and weakened the tax, the trustees will need to decide how to incorporate those changes into their projections.
Immigration levels: Immigration levels have a significant impact on the trust funds, as many new arrivals are of working age and immediately pay payroll taxes. Increased immigration can improve the programs’ finances, partially offsetting the financial challenges posed by an aging population. The trustees will need to review their immigration assumptions to ensure they accurately reflect recent data and current policy.
In each case, the boards will have to make judgments about the effects of policies on which Republicans and Democrats disagree. Even if the assumptions are revised in the most objective way possible, the absence of bipartisan public trustees could reduce confidence in the changes and expose them to unnecessary skepticism.
We are under no illusion that reforms to address the finances of Social Security and Medicare are imminent. Without substantial action, they will continue to deteriorate, worsening the eventual toll on beneficiaries, taxpaying workers and Medicare providers. In the meantime, however, these essential programs deserve comprehensive oversight. Nominating and confirming public trustees would be a straightforward way for both parties to signal their support for maintaining the objectivity and integrity of the analysis that will guide the future of these bedrock social insurance programs.
Charles P. Blahous III and Robert Reischauer were the most recent public trustees for the Social Security and Medicare trust funds. They are continuing independent analysis of trust fund finances for the Bipartisan Policy Center. Blahous currently holds the J. Fish and Lillian F. Smith chair at George Mason University’s Mercatus Center and Reischauer is a distinguished institute fellow and president emeritus of the Urban Institute.
