WASHINGTON — Cherie Schrengauer, who co-owns a small café and bakery shop in Stow, said she is “nervous” about the latest government forecasts on Social Security.
Just last week, the federal government warned that unless Congress and the president devise a fix to Social Security within 15 years, the 54-year-old Schrengauer, her parents, and every other retired American will have their benefits slashed by more than 20 percent.
“I get worried,” she said. “And I also get angry. I’d hate to see (her parents’) benefits go down” in the year 2035.
The report by the Social Security and Medicare trustees shows if Congress does absolutely nothing, by 2035 retirees will receive only 77 percent of their promised Social Security benefits. And by 2026, Medicare’s hospitalization program will be able to afford 89 percent of payments promised to hospitals.
“It’s a certain inevitability much like an avalanche gaining strength and rolling downhill,” said Robert Bixby, executive director of the Concord Coalition, a nonpartisan Washington organization that pushes for balanced budgets.
And while Schrengauer frets about the report’s predictions, it created barely a ripple in Washington, where neither political party is showing any willingness to devise the tough compromises that budget analysts say are absolutely necessary to keep Social Security and Medicare solvent.
Instead, President Donald Trump was telling reporters last week the government needs to “get back to cutting taxes,” while during a series of CNN town hall meetings Democratic presidential candidates were competing with one another for new spending plans to reduce the burden of student debt.
“We are in a moment where none of our political leaders are willing to do things that are hard,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget in Washington. “We have a political class so focused on beating the other team up that they are no longer tending to the crucial priorities of the nation.”
Rather than fixing Social Security, the two parties are offering what MacGuineas calls an “Alice in Wonderland World of free lunches,” at a time when the nonpartisan Congressional Budget Office projects the government will add $11.6 trillion of fresh debt during the next decade.
“It is certainly true that before we add new programs or cut any taxes, we already are on a fiscally unsustainable path,” said Michael Peterson, chief executive officer of the Peterson Foundation in New York.
“We will have a $1 trillion deficit as early as next year and deficits will increase every year (after). That is the definition of unsustainable.”
Others suggest the fears are exaggerated. Dan Adcock, a lobbyist for the National Committee to Preserve Social Security and Medicare said, “We don’t see it as a crisis. Certainly something has to be done before 2035 and it would be better if we did something sooner rather than later.”
“The problem with labeling this as a crisis is it could force us into a position where we have to accept a deal that is bad for the growing number of Americans who depend on Social Security for all or most of their retirement incomes,” Adcock said.
Adopted in 1935, Social Security is financed through a 12.4 percent payroll tax on wages, half paid by the worker and the other half by his or her company. The government does not apply the tax to annual earnings greater than $132,900.
Medicare, which covers health costs for those 65 and older, is financed by a 2.9 percent tax on earnings — equally divided between worker and employer.
Medicare poses the more daunting financial challenge in part because its burden will continue to skyrocket as long as health care costs increase faster than inflation.
By contrast, the financial solutions to Social Security are relatively straightforward: higher taxes, restraining the program’s growth rate or a combination of both. But that is where any agreement ends.
Republicans oppose raising the payroll tax while many Democrats reject restraints in the growth in Social Security, such as raising the retirement age or eliminating annual cost-of-living increases.
Instead, Sen. Sherrod Brown, D-Ohio, wants to impose payroll taxes on families earning more than $250,000 annually, saying “the place to start is not cutting the benefits workers have earned … it’s looking at why Ohioans who make $50,000 a year are paying Social Security taxes on 100 percent of their income while millionaires and billionaires are not.”
Last December, however, the CBO calculated that imposing the payroll tax on earnings greater than $250,000 only extends the solvency of the Social Security trust funds to the year 2044.
“Everybody needs to take a deep breath and sit back and look at the reasonable options for reforms,” said Bixby. “You cannot approach this (by saying) it has to be all spending cuts or all tax increases.”
Adcock’s organization supports taxing all earnings above $132,900 and raising the Social Security payroll tax to 7.4 percent for workers and 7.4 for their employers, a move he said would extend solvency for 75 years.
But that idea does not sit well with many people. Denny Gray, 50, owner of Al's Quality Market in Barberton, said while it is fair to tax all earnings, he opposes increasing the size of the payroll tax, saying “your average working stiff is taxed enough. There are so many hidden taxes — it's unbelievable.”
The divisions between the two parties and the political atmosphere is so toxic, many analysts fear that Congress will wait until the 11th hour to devise a solution.
“The general sentiment is a compromise will probably happen in 2034,” said Christian Weller, a senior fellow at the left-leaning Center for American Progress, a nonprofit in Washington.
“At the time the trust funds are exhausted, politicians will have to sit down and negotiate a solution rather than telling people they will get 80 cents on the dollar,” Weller said. “That’s probably political suicide.”
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