On a bi-partisan vote, the Budget Committee of the U.S. House of Representatives recently advanced a bill that would appoint a commission to study and make recommendations on ways to solve the spending and debt problems of the U.S. government. This vote was a positive sign because it shows that our debt, which has now surpassed $34 trillion, is a growing concern to some officials of both parties in Congress.
Although the bi-partisan vote was good news, twelve members of Congress voted against advancing the bill, demonstrating that some do not understand the potential fiscal emergency we will soon face if we do not take action. One of the congressmen who voted no on the proposal stated that his reason for doing so was that such a group could recommend cuts to Social Security and Medicare. Although his explanation may seem admirable, his reasoning could not be more wrong.
Why is this stance wrong? Doing nothing to address our debt and develop a plan for how we will pay for future Social Security and Medicare obligations will guarantee cuts to these programs within the next ten years. This is not an opinion but based on information available on the U.S. Treasury Department’s website. According to the Treasury, the Medicare Hospital Insurance fund will run out of money to pay full benefits in 2031, followed by the Social Security OASI Trust Fund, which will cease to be able to pay full benefits in 2033. They projected that Social Security recipients would see a 23% cut in benefits at that time.
The point is that politicians who are running around saying they refuse to look at making any changes to Social Security and Medicare because they want to protect these programs are not being honest. Consider the following statements from the U.S. Treasury Department that suggest Congress should address the impending problems with these programs. “Lawmakers have many options for changes that would reduce or eliminate the long-term financing shortfalls…With each year that lawmakers do not act, the public has less time to prepare for the changes.”
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The good news, as noted, is that there are options for saving these programs, particularly for those who need them the most. The bad news is that too many in Congress have been afraid to propose any ideas to address these problems out of fear that it may cost them in the next election. This long-term lack of leadership is exactly why it makes sense to appoint a special commission to make recommendations on ways to save these programs and stabilize our nation’s finances. If such a commission is put together so that doing the right thing for all Americans is the main goal, rather than doing the politically expedient thing, then all of us will benefit.
I am sure we all wish to take money from the general fund or other programs to shore up Social Security and Medicare. Unfortunately, given the fact that our government spends more each year than it takes in, which continually adds to our $34 trillion national debt, this is not an option. We now owe so much money that the interest payments on our debt exceeded $1 trillion last year. When we are spending this much money on interest, it limits other options. Making those interest payments must be a priority because the people and other nations who loaned us this money expect it to be repaid. Failure to repay them would put us in default, a situation which would cause an economic nightmare not only in the U.S. but around the world.
All of this can be confusing; however, it becomes much easier to understand if we compare our nation’s finances to a family’s finances. For example, we all know that if a family maxes out all of their credit cards, they are likely in serious financial trouble. They can keep the debt collectors away as long as they can make at least the minimum payments. If they do not address the underlying spending problems, they will start missing payments at some point. When that happens, life is going to become a lot more difficult.
Many people, including myself, believe that we are near the point where we have maxed out our nation’s credit cards. The Hoover Institution outlines why this is a concern: “This debt spiral threatens the economy in many ways. In the worst-case scenario, the government has so much trouble borrowing money that interest rates rise dramatically. Lenders might begin to worry about the government’s ability to pay back the debt or be concerned that the government will devalue the dollar to lower its real obligations. Even without the worst-case scenario, higher borrowing has significant economic consequences.”
We still have several options for dealing with our national spending and debt. The least attractive of these options is to continue doing what we have been doing - nothing. Doing nothing will mean cuts to Social Security and Medicare and an economic situation that is likely to cause unnecessary hardship for every American family. Based on their track record, we can’t trust Congress to make the tough choices that will be required. Our best hope is an independent commission that will make the kind of recommendations needed to get our country back on solid financial footing.
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