The economic recession has put millions of Americans out of work. Joblessness puts a heavy burden on households to put food on the table, not to mention keeping ahead of debt. Widespread unemployment also means lower tax revenues for government programs financed by tax dollars.
Consider the cash-strapped entitlement programs serving the nation's disabled and retirees: Medicare and Social Security.
Shrinking payroll taxes combined with an aging population, early retirements and rising health-care costs add up to an unsustainable financial forecast for the nation's public retirement programs.
A recent government report showed how the recession is pushing the two giant public entitlement programs closer to insolvency.
Financed by the payroll tax, the Medicare Part A (which pays for hospital expenses) and Social Security trust funds are essentially running out of money.
The trustees charged with keeping financial tabs on the two public safety nets for the elderly issued in May a gloomier-than-expected financial statement for Medicare and Social Security.
For the second consecutive year, Medicare Part A is projected to pay out more in benefits than it collects in 2009. Operating on annual deficits will deplete the trust fund's balance within eight years by 2017.
The impending insolvency of Medicare and Social Security is by no stretch of the imagination new information. The recession, however, has brought even more urgency to the situation, putting more pressure on Washington to resolve the problem.
Last year, Medicare and Social Security spent more than $1 trillion, accounting for more than one-third of the entire federal budget. Of course, fixing the financing gap is easier said than done.
Now is not the time to copy Chicken Little and scurry around scaring beneficiaries, taxpayers or policymakers that the sky is falling. On the other hand, now is definitely not the time to stick one's head in the sand like an oblivious ostrich.
Now is the time for Washington to recognize the status quo is simply a no-go. Leaving Medicare and Social Security on auto-pilot would all but assure cloudy skies for current and future beneficiaries. Each year that passes without entitlement reform virtually guarantees more drastic changes down the road, including: fewer benefits and higher premiums, co-payments and deductibles. Workers would see more of their paychecks eaten up by a higher payroll tax. The retirement age would have to be increased beyond the currently schedule age of 67 to qualify for full benefits.
Meanwhile, the Obama administration and many in Congress have pledged to extend health coverage to millions of uninsured Americans. Considering the billions of bailout dollars and trillions more in deficit spending for which taxpayers are already on the hook, I'm strongly inclined to first, do no more harm. Policymakers can't ignore in good conscience the bleak balance sheets of Medicare and Social Security when considering a massive new obligation assigned to the Federal Treasury.
As the ranking member of the Senate Finance Committee, I have helped lead three comprehensive health care policy discussions this year on Capitol Hill to lay the groundwork for reforming the unsustainable growth of health care expenses; improving quality and efficiency of the U.S. health care delivery system; and expanding affordable access to health care coverage through the tax code and private markets.
As these discussions continue, Congress must avoid creating a new budget-busting entitlement that would only make the job of fixing existing entitlement programs that much harder.