Conservatives have declared war against Social Security in their quest to "restore" the fiscal responsibility they themselves have never practiced. Unfortunately, conservative strategy almost always means they are rarely really after what they claim they are after. All this noise and outrage focused on deficits and they target the one program in the Federal sphere that is not running a deficit seems odd.
Since recommendations of the Greenspan Commission were adopted in the early 1980s, Social Security payroll taxes have exceeded benefit payments. In FY2008, Social Security received $180 billion more in payroll taxes and accrued interest than it paid out in benefits. This annual surplus is credited to Social Security trust funds that hold special non-marketable Treasury securities. The Social Security surplus reduces the amount of U.S. Treasury borrowing from the public. The total balance of the trust funds was $2.4 trillion in 2008 and is estimated to reach $3.7 trillion by 2016.
So where is all the noise and fury concerning Medicare, a program already deep in trouble?
The present value of unfunded obligations under all parts of Medicare during FY 2009 over an infinite horizon is approximately $36 trillion. In other words, this amount would have to be set aside today such that the principal and interest would cover the shortfall assuming the program continues indefinitely.
The Social Security Trust peaks in it's accumulation of funds and begins to pay out more than it takes in sometime in the next decade, but to date it is a fully funded program. Small fixes in the tax will keep it that way since the payouts are set by the program. Medicare, on the other hand, pretty much has to pay the bills as they arrive. Congress can't control that outflow very well. If either of the two programs needs work it would be Medicare. So why isn't that the target of the conservatives?
Follow the money. A report ( PDF ) released Monday from the Urban Institute might reveal the reasoning behind the focus on Social Security.
The report gives the estimates for lifetime taxes and benefits for different wager earners retiring at different times, for both Social Security and Medicare. For the following I use the examples of people retiring this year.
For a one earner couple making $43,100 this year, they will realize a tax/benefit ratio for SS of $290,000/$435,000 and a Medicare tax/benefit ratio of $55,000/$343,000. Low earners get a good deal from both programs.
A couple bringing home a combined income of $62,500 ( $43,100 + $19,400 ) still realize a net gain in SS with a tax/benefit ratio of $421,000/$457,000. Medicare works out for them as $79,000/$343,000.
A couple earning $86,200 ( $43,100 each ) the SS ratio for tax/benefit flips to a net loss for the couple, $581,000/$539,000. But they still do very well will Medicare with a tax/benefit of $109,000/$343,000.
Even a couple earning $112,000 ( $43,100 + $68,900 ) do very well with Medicare, the tax/benefit being $140,000/$343,000 while they lose more ground with SS at a tax/benefit of $741,000/$645,000.
Since there is no cap on the Medicare tax some people with the highest salaries are going to end up paying more into the program than they get back, but that adds up to a very small number of people. The vast majority of people get more than they pay for.
The structure of Medicare is malignant in that the cost side of the program is pretty much controlled by the capitalists and Congress shows no intention of addressing the most obvious fiscal danger in the budget. Why not fix this one? Could it be because pretty much everyone thinks they are getting a free lunch with Medicare?
With Social Security lower wage individuals gain the most and the higher earners help to subsidize the program. But the programs seems to be working very well and it is, after all, a social insurance program. So why is it the target?
It seems to boil down to if people think they get more than they pay out they're all good, even if it means the country goes bankrupt. But if people think for a minute that they are not getting every penny for themselves, then it's ok to attack a successful and fairly healthy program.
It speaks volumes for the values we hold dear.