A specific deficit problem – Social Security and Medicare

While we have an annual US deficit approaching $1 trillion on budgeted revenue around $3.4 trillion, nothing much is being done about it or our current debt of $22 trillion. A tangible subset of this problem includes Social Security and Medicare, which were reported yesterday by trustees to run out of money in the near future – Medicare by 2026 and Social Security by 2035.

A nonpartisan group called The Concord Coalition, who tracks and reports on our debt and deficit issues, offered the following statement.

“Today the trustees once again warn that Medicare and Social Security are not on sound financial ground,” said Robert L. Bixby, Concord’s executive director. “Sudden and substantial benefit cuts await beneficiaries in less than 20 years — well within the lifetimes of many current beneficiaries — if lawmakers fail to act. Any ‘political leader’ worthy of that title, including those out on the 2020 campaign trial, should make it a priority to find solutions that are both fiscally and generationally responsible.”

Bixby added: “The trustees’ warnings seem all the more alarming because the country is not in a position of current or projected fiscal strength. Delaying reforms, however, would simply exaggerate the generational inequities of reform. For example, the trustees say it would now take an immediate and permanent benefit cut of 17 percent to keep the Social Security trust fund solvent for 75 years. Waiting until 2035 to take action would increase that benefit cut to 23 percent.”

As a retired actuary, I have written before about a few ideas, not limited to the following:

– increase the Social Security taxable wage base to above $180,000 drawing more FICA taxes from employees and employers;

– reduce Medicare retirement age to 62 and use ACA funding for that group to shore up (it will help the risk pools of both groups);

– limit cost of living increases on Social Security benefits along with measured changes to select Medicare benefits;

– increase judiciously FICA taxes to shore up shortfalls (Medicare Part A is currently 1.45% and Social Security is 6.2% up to the taxable wage base of roughly $128,000). Medicare Part B premiums change annually.

Please encourage your legislators to act now on these issues. Bixby’s caution is a good one. As we age as a country, it will only add pressure. Also ask candidates what they propose. Do not let them off the hook with a non-answer. Deferring action has been the norm.

Advertisements

The ice is going to break

The title is a crucial line from a movie called “The Dead Zone,” based on the Stephen King novel. I use this line as a metaphor for ignoring real problems. Let me explain the context. The movie stars Christopher Walkien as Johnny, who because of a car accident, could see the future after touching someone. But, if the future was less clear, a dead zone as he described it, he could alter the outcome.

A boy he was tutoring was supposed to practice ice hockey on a frozen pond with his demanding father as the team’s coach. But, when Johnny touched him, Johnny saw the ice breaking. His father said that was crazy, even though both men knew the father did a background check before hiring the tutor. Johnny slammed his cane on a chess board and said “the ice is going to break!” The son stayed home, but the father went ahead with practice and four kids drowned as the ice broke.

So, Mr. President, members of Congress and various state legislators, let me state obvious problems with this metaphor in mind.

– We have a global water crisis including in the US with the World Economic Forum identifying it as a top long term risk. Farmers are having to fight harder to protect their diminishing water rights. It will be made even worse by climate change.  And, the problem is exacerbated with the significant water loss in fracking and lead pipes tainting some of the dear water.

– That climate change thing is a problem in its own right. Our federal government and several state government need to pitch in more and help. The President backing out of the Paris Climate Change Accord is as poor a decision as could have been made, especially when it came the day after ExxonMobil shareholders voted to order management to inform them on what they are doing about climate change.

– I learned today our EPA is turning a blind eye to asbestos. Since Brazil stopped production of this toxic product, we now are importing asbestos from Russia. As a metaphor for this President, each bag of toxic asbestos imported from Russia has Donald Trump’s picture on it. A toxic material imported by a toxic man from another toxic man.

– Although, debt is not an environmental concern, our so-called leaders are ignoring this huge and growing problem. As interest cost grows to a greater part of our budget, it will hinder our ability to do other things. We must spend less and increase revenue both. The math will not otherwise work,

The ice is going to break. We must heed the warnings now. If we don’t, we may be the ones who drown.

What would you say?

What would you say to a US President where the stock market grew at annualized rate of 12.8% during his tenure, excluding dividends.

What would you say to a President where net new jobs were added at an annual rate of 1.4 million, with a rate of 2.6 million per annum the last four years.

What would you say to a President where the unemployment declined from 7.6% when he started to 4.8% when he left?

What would you say to a President where the US economy had 91 consecutive months of economic growth, which eventually became the second longest in US history?

What would you say to a President that saved the largest car company in the US?

You would say thank you President Obama. The economic growth has continued under the current US President, but we should not forget he was handed the keys to a pretty good economy. It should also be noted the country was in a housing caused recession when Obama got the keys.

I mention this as the current President is too busy taking credit to give a thumbs up to others. With that said, Presidents get too much credit and blame for the economy. They only provide headwinds and tailwinds.

Yet, if people want to go there, Democrats need to do a better job of marketing. Under 12 1/2 four-year GOP Presidential terms as compared to 12 four-year Democrat Presidential terms since 1921, the number of jobs created under a Democrat President dwarfs that under a GOP President, by 2 to 1. Further, the stock market results since 1901 is markedly better under Democrat Presidents.

So, the Dems can rightfully claim they are the party of jobs and economic growth. I am delighted the growth continued under Trump, but the headwinds do not look favorable. The tariffs and added debt on top of expected increases is bothersome.

Hey Dems, focus on these four issues

One of this Independent voter’s frustrations with politics, which is exacerbated by this President, is pressing issues are not getting discussed. And, some are made worse or are sabotaged by the current White House incumbent as we are told to focus our attention on issues he has overstated in importance or sold on fear.

While there are many issues, it is hard to boil the ocean. So, my advice to all politicians, but especially the Democrats who are pushing these ideas, is to narrow the focus to the following four issues.

– Stabilize the healthcare system and have a good debate on Medicare for All, which is a hard sell. The GOP has failed to realize that a reason they lost the House is not listening to most Americans, instead sabotaging the ACA reneging on commitments to insurers and trying to repeal it. As a retired benefits actuary, consultant and manager. I would suggest an idea to stabilize the ACA is to expand Medicare to retirees at age 60 or 62 and measure the impact for its veracity. But, we need to start by paying insurers what we committed to them.

– Climate change is real, is happening and is man-influenced. AOC is dramatizing a little about the end of the world, but the data point she is citing is if we do not make huge strides by 2030 (12 years), our ability to stop the warming trend impact is minimal. She has been ridiculed for he Green New Deal by the GOP, but I would rather discuss her plan than Senator Marco Rubio ignoring the fact the largest city in Florida is the most at risk city on the planet and is seeing a larger number of sunny days flooding from the rising tides. Who is the crazier person, the one speaking to a problem or the one ignoring it altogether?

– Job retraining is key, but we need to understand the major reasons the jobs are going away are technology/ robotics and CEOs chasing cheap labor. It is not immigration or trade, which are down the list. This especially true in those impoverished areas where industry has left them behind moving or closing a plant.

– Finally, the debt and deficit are critical to discuss. The debt just passed $22 trillion and is headed to $34 trillion by the end of 2027. The annual deficit will pass $1 trillion this year, which is nearly 1/3 of our annual revenue. My former party and, in particular, the Freedom Caucus, are as hypocritical as they come. When the Dems had the White House, the Freedom Caucus screamed bloody murder when the debt was $8 trillion, then $13 trillion. But, I give the same caution to Dems I give to the GOP, we must reduce spending and increase revenue. The math will not work otherwise, so says the CBO, Committee for a Responsible Federal Budget, The Concord Coalition and Simpson-Bowles Deficit Reduction Committee.

Of course, there are other critical issues. But, if you focus on the important few, it will resonate. This is especially true for younger folks – climate change, debt, future jobs and healthcare are important. In my view, the GOP has lost its way on issues of import. When I left the party twelve years ago, a key reason was its global warming denying stance. My thesis is if you are denying the greatest threat facing our planet, how can I trust you on resolving other issues?

We are behind the eight ball on too many issues. We are leaving our problems to our children and grandchildren. They will ask us, why did you do that? Why, indeed?

Real problems are not getting addressed

In lieu of focusing on problems that have been overstated by fear and misinformation, several real problems remain. Just to name a few – $22 trillion in debt with an expected $1 trillion annual deficit; ill-crafted tariffs which are slowing the global economy; increasing poverty and hunger; climate change interventions; infrastructure needs that are ticking time bombs; retraining workers impacted by technology; domestic terrorism and gun deaths; and stabilizing the ACA. These are the concerns of this independent voter, who has belonged to both parties.

Note: I wish to applaud Germany for announcing last Friday they plan to phase out coal energy by 2038. It should be noted that in 2018, renewable energy surpassed coal energy in Germany. This is what can be done when real problems are addressed with planning. The US is doing many good things with renewable energy, but it could do so much more with supportive federal leadership.

Sample letter to Senators to open government

I posted the attached letter on my two Senators and Senator McConnell’s websites. If you like this, please feel free to modify and use.

**************************

Senator, it is time to open the government, so please pass the forthcoming two house bills. I would ask you to urge the President to please stop lying about the number of border crossings and his role in causing this shutdown. His divisiveness and fear-mongering have caused this problem. We need fact-based and compassionate debate over DACA and border security and less of whatever the President is talking about.

It is time to govern

Now that the elections are over, it is time to put away the rhetoric and focus on governance. This used to be how it was done, until we segmented the news into various markets. The past twenty years or so, we seem to govern off the campaign rhetoric rather than facts and collaboration has become a dirty word.

As an Independent voter, who has been a member of both parties, the governing off rhetoric and lack of collaboration need to stop. Neither side owns all the good ideas and both sides have some bad ones. And, we need to focus on the underlying truths and facts rather than tweets and who wins a public relations battle over an issue. Process matters – when politicians deviate from process, it is for political reasons.

In this spirit, here are the issues that this voter thinks we should focus on. Many voters have voiced agreement on some of these, but some issues just don’t get due attention.

– we should stabilize and shore up the ACA which most Americans favor: funding commitments to insurers will stabilize premiums, as will expanding Medicaid and considering the expansion of Medicare down to age 55, 60 or 62.

– we should ditch the harmful tariffs and work with our allies and the WTO to pressure China to stop the intellectual capital theft. Tariffs hurt consumers and producers, especially our farmers.

– we should address infrastructure needs which are many, doing so as we have done in the past with a blend of business, venture capital and federal, state and local government funding.

– we should recognize that the two biggest threats to our planet per the World Economic Forum are our water crisis and climate change, which exacerbates the first issue: strides have been made, but we need to reassume our global leadership role on climate change and focus on measures to address both.

– we should add more governance around gun control issues: Gun-owners and non-gun owners have voiced agreement on measures that would help. It should be noted most gun-owners do not belong to the NRA, so the NRA’s political activism against reasonable change should be noted, but not over-emphasized.

– The deficit and debt are building to a point of huge reckoning. It has been eight years since the Simpson-Bowles Deficit Resuction Committee report was shelved. It was shelved because it recommended $2 in expense cuts to every $1 in revenue increases. It was shelved because neither party had the political courage to roll up their sleeves and make tough decisions – we cannot get there with only expense cuts or revenue increases, needing both.

– We should stop the lack of civil discourse and beating up on the media. The media’s role is vital to our democracy. Pay attention to where your news comes from. Be wary of opinion disguised as news. Tweets are not long enough to show context or subtlety and are an easy way to misinform, as a result. To this end, it is vital for our democracy to return to appropriate Congressional oversight. We are not a kingdom.

If anything, we must have our politicians work together. The crime bill the President is pushing and that passed the House is not perfect, but is a bipartisan effort. It makes steps forward. Let’s make needed improvements and get something done. And, that is what Americans want most from our politicians – stop the grandstanding and get stuff done.