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Are entitlements pushing U.S. toward bankruptcy?

Yes: Federal leaders in denial as they head toward fiscal cliff; No: The people we help today will be productive taxpayers tomorrow

Published: Sunday, July 5 2015 11:14 p.m. MDT

Treasury Secretary Jacob Lew, accompanied by Health and Human Services Secretary Kathleen Sebelius, speaks about Social Security and Medicare earlier this year. (Associated Press) Treasury Secretary Jacob Lew, accompanied by Health and Human Services Secretary Kathleen Sebelius, speaks about Social Security and Medicare earlier this year. (Associated Press)

Yes: Federal leaders in denial as they head toward fiscal cliff

WASHINGTON — Any honest assessment of America's entitlement programs recognizes that they're headed for insolvency without modernization and reform. But too many of our leaders refuse to believe it or delay action for their own political interests.

By settling for denial, distortion and delay on entitlements, we risk our nation's future. If we fail to address the crisis — and soon — we threaten our commitment to America's poor and elderly, jeopardize our investments in other national priorities, leave future generations vulnerable and ultimately face national bankruptcy.

Unless we're willing to live with those consequences, we must face up to some facts.

First, the programs are unsustainable. As currently structured, entitlement programs can't keep up with longer life expectancies and changing demographics.

Before long, one-third of Americans will be retired and will spend one-third of their lives in retirement. Over the next 20 years, the number of Americans 65 and over will jump by 75 percent, while those of working age will nudge up by just 7 percent. Within a decade, the total price for Social Security, Medicare and Medicaid will reach $3 trillion a year, but we'll have fewer workers paying into the system and supporting those growing costs.

Second, entitlement programs don't pay for themselves. They are not self-funding and, for the most part, never have been.

Medicare has had a cash shortfall every year since its creation except two: 1966 and 1974. Medicare's annual cash shortfall in 2011 was $288 billion. Social Security had a cash flow deficit of $58 billion in 2012. Money must be borrowed to make up for these shortfalls, making entitlements primary drivers of our deficits.

Third, the major programs will be financially insolvent in 20 years. The trust fund for the Social Security Disability Insurance program will be exhausted in just three years.

The trust fund for Medicare Part A, which pays for hospital services, will go bankrupt in 13 years. That projection is based on a "rosy scenario" where Congress will do something it has refused to do time and time again — cut payments to doctors. Social Security will be unable to pay full benefits beginning in 2033 and will be forced to reduce payments by 23 percent.

Finally, it would cost $40 trillion over the next 75 years to keep these programs exactly as they are. We don't have the money. Absent reform, the situation will soon require either painful benefit cuts in the programs or economy-crushing new taxes — or both.

But there's good news amid these grim facts. We can reform entitlements without baseline cuts or harming care for the elderly, disabled and less fortunate.

An array of think-tanks are exploring ways to restrain growth and make the programs sustainable. There are many reform options available for consideration — relatively small adjustments in payments, benefits, eligibility, administration and overhead; coverage options and program efficiencies. If we choose from those options wisely and soon, we can achieve large savings over time with a minimal impact on those who rely on the programs.

The alternative is to do nothing, which would set into motion the harshest and most burdensome entitlement changes of them all — the massive benefit cuts and tax hikes that would be imposed when the programs' funding just flat runs out.

So we can choose to face the facts — and act on them — or we can choose to face the consequences. It should be obvious which of those choices is in the best interests of the elderly and the disadvantaged as well as our collective future.

R. Bruce Josten is executive vice president for government affairs at the U.S. Chamber of Commerce.

No: The people we help today will be productive taxpayers tomorrow

COLUMBUS, Ohio — During bad economic times, government spending on such programs as unemployment insurance, food stamps and Medicaid will rise, as more Americans lose their jobs and need immediate economic assistance.

To spend more dollars for that assistance is good fiscal policy. To cut back on that aid, as some are advocating, would produce short-term savings, but it would be a bad investment for America in the long run.

Most Americans who have lost their jobs are eager to get back to work. But they're looking for work in a market where the number of jobs that match their skills is insufficient. They may need extended unemployment insurance, food stamps and health-care benefits to tide them over. Providing that assistance will give them the time and energy they need to successfully find employment in an improving economy where, slowly, more jobs are being created.

Does providing such assistance encourage people to relax on the dole? The conservative Republican governor of Ohio, John Kasich, recently spoke in favor of expanding Medicaid benefits to Ohioans in poverty. He said: "As Americans, we need to beat back this notion that when somebody's poor, somehow they are lazy."

Kasich is right. Almost all Americans want to be productive, self-sufficient citizens, giving back to society in the form of their labor.

If we spend more money helping them now, that's a good investment, because these Americans will eventually re-enter the labor force and produce billions of additional dollars for our economy.

The economic gains from their productive labor will more than repay the dollars spent helping them. And if we don't help now, those millions temporarily unemployed will have to cut back even more on their monthly spending for food, clothing, and other essentials. That won't be good for our economy.

If we expand Medicaid benefits under the Affordable Care Act to cover health care for up to 20 million more Americans currently ineligible, we'll give them the security to keep working at low-income jobs that don't provide health benefits, or to find work when they're laid off from a job in their later years. This gainful employment of millions directly benefits our economy.

Should we scrutinize entitlement program spending for potential waste, fraud, or abuse? Of course. Effecting savings by ensuring wise and lawful expenditure is always a good idea.

Some argue that the market economy will move to remedy any insufficiency in government programs. But our unemployment rate is now 7.6 percent and more than 46 million people live in poverty. Sometimes the market works its wisdom. But we need government to step in when it fails.

The United States of America is the wealthiest nation on earth. Surely we can afford to help those temporarily in need, and those long-term in poverty.

Should we need to reallocate more dollars to do this, we could cut back our huge annual defense expenditures — a projected 38 percent of total worldwide military spending in 2013. And we could end unnecessary warfare. We could bring America's fighting men and women and those billions of dollars we're spending overseas, back home.

In addition to the fiscal wisdom of investing in our fellow Americans, do we not have a moral obligation to help them when they're in need?

Millions of worthy, productive American men and women need our help. Let's give it to them. It's a good investment, and it's the right thing to do.

Fred Andrle is a former executive producer and host of a daily public affairs radio talk show on WOSU in Columbus, Ohio.

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