CBO Director: Important to Give Advance Warning About Coming Changes to Social Security
(CNSNews.com) - The United States faces "fundamental fiscal challenges" stemming from the growth in spending for Social Security and major health care programs," CBO Director Douglas Elmendorf told a gathering in Washington on Tuesday.
The rising cost of those programs leaves Americans with "unpleasant" choices to make, but the sooner they're made, the better, he said:
"So we have a choice as a society to either scale back those programs relative to what is promised under current law; or to raise tax revenue above its historical average to pay for the expansion of those programs; or to cut back on all other spending even more sharply than we already are," Elmendorf said.
"And we haven't actually decided as a society...what we're going to do. But some combination of those three choices will be needed."
Elmendorf said there are various ways to proceed: "But they tend to be unpleasant in one way or another, and we have not, as a society, decided how much of that sort of unpleasantness to inflict on whom."
He noted that many Americans have paid Social Security taxes for decades, expecting to get benefits in retirement. But the money people paid years ago was used to fund other government activities.
So, "If one wants to change those programs, then giving people a lot of warning about that -- those changes coming -- would be especially important," he said.
Elmendorf said the nation's main fiscal challenge is not short-term deficits, but "the very high level of debt" over the long term:
"And a high level of debt will ultimately crowd out capital investment and slow accumulation of capital and slow the growth of wages and incomes. It also reduces the flexibility for policymakers to respond to future crises that arise.
"So it's the high level of debt and the growing deficits in the long-term. The reason why action today would be beneficial is because if you -- we want to make changes in programs for retirees or changes in the tax code, it's better to make those with a warning. One wants to set -- one wants to make changes. One wants to set them in motion early, even if their full effect won't be felt for many years."
Elmendorf said Social Security, Medicare/Medicaid and Obamacare will be much more expensive relative to GDP in future years because health care costs are rising, subsidized health insurance is expanding, and the population is aging: "There will be a third more people receiving Social Security Medicare benefits a decade from now than there are today," he noted.
"And with those three factors at work, that handful, just a handful of very large programs, is becoming much more expensive."
Elmendorf was interviewed at The Atlantic's 2014 Economy Summit in Washington.