As the economic recession continues to worsen, it is reducing revenues far below previous projections. As a result, U.S. officials warned Tuesday that Social Security will run out of funds in 2037, four years earlier than last year's estimate, and Medicare will be insolvent in 2017, two years earlier than last year's estimate and a scant eight years away.
The Obama administration said the Social Security issue could be solved by raising payroll taxes 2 percentage points to 14.4 percent. There goes the Obama tax cut of $7 a paycheck.
Administration officials said another option would be to reduce benefits by 13 percent or to combine a reduction in benefits with an increase in payroll taxes.
But both of those options look like roads to destitution and failure. Raising payroll taxes would be massively unpopular and break a major pledge Obama made during his election campaign.
Worst of all, it would deal a body blow to the Keynesian stimulus strategy Obama and Treasury Secretary Timothy Geithner are banking on to pull the U.S. economy out of recession. With April job losses still running at 630,000 after five previous months in a row of 650,000-plus job losses, that isn't happening yet.
Reducing Social Security benefits isn't going to happen either. The trustees already said Social Security won't be giving any increases the next two years, which is sure to ire the politically powerful AARP.
Obama's new health and human services secretary, former Kansas Gov. Kathleen Sebelius, must be wondering what she got into. First she had to deal with the swine flu pandemic threat during her first week in office, and now this during her second week. Sibelius said the Medicare issue proves the importance of healthcare reform, which is Obama's key domestic issue.
She may be right, but both Social Security and Medicare need the attention of members of Congress, who have been successful for years in demanding something be done about these entitlement programs and then passing the chore to a later Congress.
The crisis is far too pressing, and the need to rein in out-of-control government spending is far too great, for Obama to put it off for a couple of years or until his second term in office -- assuming he wins one.
Also, as the president very well knows, the first few months in office are the brief golden age when the most effective and sweeping reform measures can be pushed through. Following Sen. Arlen Specter's defection to the Democrats and with Al Franken's confirmation as the victor in the Minnesota race now appearing virtually certain, the Dems will have that rarest of national political prizes, a filibuster-proof majority in the Senate.
All of this means that Obama must use his current political capital to tackle the hard and crucial issues of Social Security and Medicare reform now, if he is going to do it all.
But another pattern of American reform may militate against him. Bold new reforming Democratic-liberal administrations tend to be extremely inexperienced and prone to domestic and legislative bungles when they first take office.
President Franklin Delano Roosevelt, the greatest reforming president in U.S. history, bungled badly with his National Recovery Administration that was created during his first 100 days. It proved to be an unworkable bureaucratic behemoth that was eventually mercifully euthanized by the Supreme Court as unconstitutional. FDR eventually changed direction radically, focusing on creating Social Security and building up the power of big industrial unions during his second 100 days in spring 1935.
In 1965 President Lyndon Baines Johnson passed crucially needed civil rights legislation and created the Medicare and Medicaid programs. But he also pushed through a notoriously bungled welfare reform that created generations of social pathologies affecting tens of millions of people before it was finally reformed more than 30 years later. Then, President Bill Clinton, for all his otherwise assured domestic performance in office, badly bungled his own efforts at healthcare reform during his first two years in power.
So far Obama and his chief of staff, Rahm Emanuel, have appeared as helpless as kittens to rein in the established Democratic leaders of both chambers of Congress, Senate Majority Leader Harry Reid of Nevada and Speaker of the House of Representatives Nancy Pelosi of California, from spreading pork barrel spending like there was no tomorrow.
After a weak start like that for the president and his chief of staff, getting Pelosi and Reid to bite the bullet and push through tough, controversial and unpopular spending cuts on Social Security and Medicare is going to be a tough sell for Obama, assuming he can even convince himself to do it in the first place.
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