US facing long-term economic challenges

Published 10:56 pm Monday, March 6, 2006

By By Tray Smith
I do not make enough money to be liable for federal income taxes. But this year, along with young people all across our nation, I will pay over a half of a trillion dollars in taxes. How is that possible, you ask? Because our government will borrow $400 billion just to cover its expenses plus it will use $100 billion dollars from the Social Security Trust Fund that it is obligated by law to return at a later date. And the problem is about to get much, much worse.
Of the many long-term economic challenges our country faces, the greatest is the long term unfunded liability of federal entitlement programs. Specifically, Medicare, Medicaid, and Social Security will consume sixty percent of the federal budget by the year 2030. This huge explosion in entitlement cost will lead to staggering tax increases, sharp spending cuts, and larger deficits all at one time. Scarce funds will remain for important national priorities such as defense and homeland security. At the same time we will face emerging threats from India and China, all of our resources will be absorbed by entitlement spending.
According to the Medicare Board of Trustees, the unfunded liability of Medicare alone is $29.9 trillion over the next 75 years. When Social Security is included the government faces another $5.7 trillion in unfunded entitlement cost. Because Medicaid is not technically an "entitlement", its unfunded liability cannot be calculated. But the fiscal problems it will cause on both the federal and the state levels will be just as great if not greater than that of Medicare.
In order to calculate the unfunded liabilities of these programs, the federal government estimates the difference between the taxes that will be collected in order to support Social Security and Medicare and the benefits that they will pay out. Because those benefits have already been promised to qualified recipients, they cannot be changed in the annual budget process. Instead, they automatically increase each passing year and require changes in law to slow the rate of growth.
However, because these programs are just as challenging politically as they are economically, no solution is insight. No politician is concerned with solving these problems because no politician wants to go home and tell his constituents that he voted to reduce their Medicare benefits. The fact that seniors make up a huge voting block adds to the problem.
It was because of this political mindset that President Bush's signature Social Security plan fell dead in Congress last year, while his huge expansion of Medicare passed in 2003. Specifically, the Democratic Party must be signaled out for using fear tactics and exploiting the public's ignorance on President Bush's proposal in order to abstract progress. House Democratic leader Nancy Pelosi recently boasted, "They said we couldn't beat something with nothing, but with Social Security we did just that." But the nothing that they beat Social Security with will cost over $5 trillion.
In order to try to overcome the stalemate, President Bush has now called for a Bipartisan Commission to recommend a way to solve these problems. However, there is no reason to believe this committee will ever be created or that its recommendations would ever be seriously considered if it was. At least five committees have been established to examine improvements to Social Security, Medicare, and Medicaid since 1990, and none of their recommendations have been passed into law. Furthermore; there are several committees in Congress perfectly suited to tackle the issue, but they won't because of the political consequences.
Therefore, we are left with an enormous challenge that no one is willing to confront. The only option left is a grassroots campaign across America in order to achieve reform, which I seriously doubt is going to happen. Furthermore, President Bush has, at least for the time being, given up on his reform efforts. It is time that our national leaders do just what they are suppose to do, lead.
There are several solutions for sound structural reforms to our healthcare and pension systems that will solve the federal entitlement problem along with problems in the private sector. These reforms will not have a harsh effect on the elderly. It is time that Congress beats the special interest and passes comprehensive entitlement reform.
Some people have said that these issues are not just a challenge, but a crisis that we are already in. Others say we cannot consider it a crisis yet. But that just depends on your view of a crisis. Were we in a crisis two days before Ivan hit and, or was it not a crises until after the storm struck land? Either way, we began tying objects down and boarding up our homes. Shouldn't Congress begin tying entitlements down, too? That is the bottom line.
Tray Smith is a freshman at Escambia Academy. He writes a political column for the Atmore Advance. He can be reached for comment at column appears weekly.

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