With the baby boom retiring, payroll taxes no longer fund benefits, and by 2118, payments will exceed those taxes plus interest earned by the trust fund, and start running down the capital. Eventually, the system will be broke, even with higher payroll taxes, under any realistic set of economic growth assumptions.
It is time to get serious. Increase the retirement age to 70 for everyone under age 55. Ten years is plenty to plan for that. Set aside jobs in municipalities—for example, maintenance positions at the schools or clerking in county offices—for those individuals over 60 in physically rigorous occupations that can’t find alternative work.
The United States spends 19 percent of GDP on health care, while Germany with a system of mandatory private insurance—note the similarity to Obama Care—spends 12 percent. The United States simply can’t afford that competitive disadvantage.
The President’s new health care law is unlikely to deliver promised cuts in Medicare reimbursements to providers, will likely push U.S. spending above 20 percent of GDP and keep the federal deficit in the range of $1.5 trillion .Don’t believe OMB deficit projections to the contrary—those have proven consistently too optimistic.
It is high time for real reform. Limit prices Americans are charged for drugs to what the Germans pay, slice doctors’ salaries and overhead paid to hospitals and private health insurance bureaucracies to German levels, and implement genuine malpractice reform.
Alas, members of the AMA, pharmaceutical and health executives, and tort lawyers contribute generously to campaigns of Donkeys and Elephants alike, making Mules of the rest of us.
Sadly, most Americans are going to wind up paying higher taxes and not getting much for it but more budget troubles, high unemployment and limited futures for their children.
Peter Morici is a professor at the Smith School of Business, University of Maryland, and former Chief Economist at the U.S. International Trade Commission.