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Nuts & Bolts

September 5, 2012

Social security's woes are worse than you think

While the Romney and Obama camps have made increasingly bitter accusations about each other's plans for Medicare, a bipartisan consensus on entitlements has emerged in the past few years. Too bad that consensus is wrong.

On both left and right, the politicians and the experts are saying the United States needs to fix Medicare — and have made fixing Social Security an afterthought. President Barack Obama has signed changes to Medicare into law, but has done nothing about Social Security. For two years in a row, Republicans in Congress have supported budgets that rein in the growth of Medicare spending but leave Social Security alone. Expect to hear a lot more about Medicare than Social Security at the Republican convention this week.

The main reason Medicare is getting more attention is that in the long run, it has much higher costs than Social Security. That's why it's often described, accurately, as the driver of America's long-term debt problem.

The Social Security gap looks small, though, only in relation to Medicare. On any other scale, it's pretty big. The 1983 deal to fix Social Security is often held up as a model of bipartisan achievement, with the implication that it just needs to be replicated to fill the gap: No big deal. Charles Blahous, a Social Security trustee and the author of a recent book on the program, points out that this model is actually pretty discouraging.

In 1983, the financing gap over the next 75 years amounted to 1.8 percent of payroll. Blahous estimates that the gap today, measured using the same standards as in 1983, is 3.5 percent: almost double what it was then. And every year that passes without action, that number gets bigger. Do we think today's politicians are prepared to solve twice as large a problem as their predecessors did?

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