Is A Crisis Really Coming?

WHEN I WAS PART OF THE LAST BIPARTISAN COMMIS- sion on entitlements, I knew we were in trouble when, after deciding 30 to 1 that benefits for seniors are "unsustainable," we couldn't agree on how to solve the problem. We projected that if current policies are left on auto- pilot, Social Security, Medicare, Medicaid, federal civilian and military pensions, and interest on the federal debt will together exceed total government revenues by the year 2015. The numbers get worse every decade thereafter. Now there is talk of another commission. Here's how to make change really happen.

Bully for bipartisanship. The commission should include young adults as well as those rare leaders with real moral authority, like Colin Powell. And it has to have the president's steadfast support. What better legacy for this quintessential boomer than to prepare his own generation for the crisis ahead?

Focus on the big picture. Status- quoists like to treat every program separately and argue that no single one is unsustainable. It's as if no one stone hurts in the landslide that buries you. Let's not fool ourselves: the costs of Social Security and Medicare alone are projected to rise to between 35 and 55 percent of taxable payroll by 2040. The young will not tolerate a doubling of their total federal tax burden simply because the take is divvied up among different programs.

Watch the bottom line. All proposals should focus on national savings (which must be raised) and the long-term unified budget (which must be balanced). Most of the other criteria bandied about, such as trust-fund solvency, amount to budgetary three-card monte. They allow us to shift IOUs around without raising new savings. Balancing the budget by 2002 is a low-impact warm-up exercise compared with the grueling iron-man challenge that lies ahead when 76 million boomers retire. So while Congress works on the near term, let's make sure any commission focuses entirely on the long term. It's by far the tougher job.

TO SOME COMMENTATORS ON ENTITLEMENTS, CHICKEN Little was right: the sky is falling. By talking about "entitlements" as if all programs share a similar problem, these messengers of gloom are really conveyors of confusion. Social Security faces a modest deficit that can be easily closed. Medicare has larger problems, but a presidential commission is not likely to help much with either program.

Social Security is a smashing success. It lifts 15 million people out of poverty each year. It is the largest source of income not only for retirees but for the disabled and survivors of deceased workers. And it is adequately funded for 30 years. Social Security does have a projected deficit measured over 75 years, but it can be easily managed. From now until 2035, years after the last baby boomer has reached retirement age, the cost of Social Security is projected to rise 1.8 percent of gross domestic product, about the increase in national defense spending between '79 and '86. Modest ben- efit reductions and small tax increases imposed gradually can bring revenues and expenditures into balance.

The main factor driving up the combined cost of Medicare and Social Security is not growth in the number of the elderly, which accounts for only one third of the projected increase in the share of national income claimed by these two programs. The main cause is the expected growth in per capita medical costs, which makes up two thirds of the projected increase in this share. To argue that pension benefits should be cut because of unsustainable projected growth in medical costs seems a bit irrational.

A bipartisan commission is probably not the answer to any of these problems. Traditionally, presidents use commissions to dodge issues. Difficult questions are difficult because powerful groups have large and conflicting interests. Such groups do not cede authority to commissions. They fight their own battles--and they will be at their battle stations in any coming clash.

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