Is Social Security the US's Best Funded Program?
In less than three weeks, massive tax hikes and spending cuts are set to take effect unless the White House and Congress can agree on a plan to avoid the so-called fiscal cliff. President Barack Obama and House Speaker John Boehner held their first face-to-face meeting Sunday to discuss possible outcomes. Negotiations are likely continue until Congress leaves for the holiday recess. Republicans are starting to accept the fact that higher taxes on high-income earners will be part of a fiscal cliff deal.
Republican Senator Bob Corker from Tennessee told Fox News over the weekend that a growing number of Republicans, including himself, are willing to raise the tax rate on the top 2% of Americans if cuts are made to entitlements. The three top entitlement programs --Social Security, Medicare and Medicaid -- account for about 10% of U.S. GDP. Social Security and Medicare are expected to grow substantially over the next 10 years as baby boomers retire and become beneficiaries. But the future of the two programs look very different.
"Social security is the best-funded government program," says David Cay Johnston, a pulitzer prize-winning reporter and author of several books on corporate and government policies including The Fine Print: How Big Companies Use "Plain English" to Rob You Blind. Johnston explains that Social Security has a dedicated stream of income and the program actually ended last year with a $100 billion surplus.
In contrast to Social Security, "Medicare is a real nightmare," says Johnston. He says healthcare payments for Medicare recipients surpass the healthcare liabilities of 33 other countries in the Organisation for Economic Co-operation and Development (OECD), all of whom have universal healthcare. He suggests that the U.S. adopt a single-payer healthcare system but admits it's unlikely to happen in the foreseeable future.
In the meantime, he suggests the U.S. switch from what he calls a "business model" focused on profits for insurers to a service model like education and police.
"It would require a sea change of thinking," says Johnston, but "it's possible."
Johnston also suggests a national health service for older Americans that would help drive down the cost of healthcare. Doctors would be protected from the lawsuits that often threaten private practices and the service would end "defensive medicine" -- i.e. extra, and often expensive, tests. Those additional tests—not the lawsuits—are what's largely driving healthcare costs higher, Johnston says.
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