The Next Congress Must Pursue Entitlement Reform

Irrespective of whether politicians reform Social Security and Medicare, those programs will experience benefit cuts in roughly a decade’s time. Either lawmakers will design these cuts — with which age cohort they will begin, how they will account for income, etc. — or they will occur automatically as trust funds become insolvent. Social Security faces a 21-percent benefits reduction by 2033; Medicare, an 11-percent reduction by 2036. Ignoring the issue is not an option.

Taxpayers should have little optimism that Congress, should it continue to procrastinate until it reaches the brink of insolvency, would succeed in enacted well-crafted reforms. However, initiating these reforms now — while time remains to deliberate, negotiate, and fully consider the issues at hand — would allow the nation to avoid assured chaos in the 2030s.

In January, Republicans will assume control of a unified government. The fiscally conservative impulses of the party of Calvin Coolidge and Andrew Mellon should once again reassert themselves. However, the sort of overhaul Social Security and Medicare require must have bipartisan support and participation. As the national debt climbs towards $40 trillion, anyone — of any party — should welcome such efforts. It is less a matter of political preference than simple mathematics.

Admitting you have a problem is the first step to fixing it, as the saying goes. “Spending on [Social Security and Medicare] alone consumes 45 percent of the federal budget,” Veronique de Rugy noted in 2023. “Along with Medicaid, these programs are the drivers of our current and future debt. And to drive home the seriousness of our predicament, note that Medicare and Social Security together face a shortfall of $116 trillion over the next 30 years.”

Social Security consumes an astounding portion of public resources. It “is the single largest federal government program, spending $1.2 trillion in 2023 or 4.5 percent of gross domestic product (GDP),” analysts Romina Boccia and Ivane Nachkebia wrote. With a projected annual deficit in the hundreds of billions, it faces a $23 trillion cumulative deficit through the year 2053 and will balloon to 5.2 percent of GDP by 2033.

Medicare, the second largest program, is faring little better. Medicare outlays reached $1 trillion (3.8 percent of GDP) in 2023 and will likely top $2 trillion (more than 5 percent of GDP) within a decade. Its projected 30-year shortfall sits at $77 trillion.

Fortunately, the American people, when confronted with cold realities, support reform. According a 2023 poll from the Taxpayers Protection Alliance (TPA), voters believe lawmakers have done far too little to ensure Social Security and Medicare remain operational. Voters overwhelmingly like these programs; and the political hazards that attend attempts to reform them today will likely pale next to the chaos that, absent such reform, will erupt from insolvency and mandatory benefits cuts.

Nonetheless, politicians of both parties have long blinded themselves to the pressing need for entitlement reform. But ignoring mathematical and fiscal facts can continue only for so long. “Reality,” as Jeff Bezos wrote recently, “is an undefeated champion.”

In January, a new Congress will sit, and a new president will move into the White House. They should recognize reality and proceed accordingly.