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Monday, Nove Does Bush Have a Plan? Bush has repeatedly underscored a forecast by the Social Security trustees that the system may run out of money in 2042 - and voiced the hope that shifting some of the tax revenue now underwriting Social Security into private accounts could somehow ease that crunch. But until and unless he lays out a specific plan, analysts are largely limited to discussing options proposed by the commission Bush appointed in 2001 to draft a privatization plan. However, that panel's report doesn't really claim that privatization will solve Social Security's long-range funding problems. Instead, the commission suggested cutting the rate of growth of future benefits. Under current law, benefits for a worker who has reached retirement age are based on his or her highest 35 years of earnings. But since wages in 1970 were generally much lower than today, numbers from earlier years are also adjusted at retirement by a complex formula to reflect changes in wage rates over time. Once computed, the worker's benefit is thereafter adjusted annually for inflation as measured by the Consumer Price Index. Most Americans are familiar with the CPI. But few realize that Social Security's initial recomputation of past wages adjusts not just for inflation but also for the growth in real purchasing power that generally accompanies productivity improvements in the economy. For example, in a year with 2 percent inflation and a 1 percent productivity increase, wages would increase by about 3 percent. Bush's commission suggested gradually changing the formula for recomputing past wages to reflect inflation alone - a annual 2 percent increase in the previous example rather than 3 percent. Compounded over time, such a change could reduce projected benefits by 30 percent or more by 2042. That cut would be enough to erase the shortfall between taxes coming in and benefits being paid that the trustees predicted could occur in that year. Even after eliminating productivity increases, such reduced benefits in 2042 would still be higher than the benefits paid today after being adjusted for inflation. But any kind of cut in Social Security benefits - even a reduction in the anticipated rate of increase - is certain to arouse fierce political opposition. posted by PE Magazine Editor | 10:53 AM Permalink | Trackbacks (0) | Comments (0)
Monday, March 14, 2005 Medical Woes That Never Cease Since Medicare was created in 1965 it has grown to a $325 billion program serving 42 million beneficiaries. Medicare costs are projected to increase 9 percent a year through 2015. ( Medicaid, the federal-state insurance program for low-income and disabled people, also is under enormous cost pressures.) Under the latest federal projections, Social Security is $3.7 trillion short of what it will need to pay benefits over the next 75 years. Medicare must find an estimated $27.8 trillion. Rather than address the Medicare challenge, Bush has prompted Congress to focus instead on Social Security. Medicare costs are smaller than the Social Security, which costs $517 billion this year, but trustees for both programs project that Medicare costs will overtake Social Security by 2024 and nearly double them by 2078. As if that weren't scary enough, Bush pushed through a drug prescription benefit in 2003 that could add $724 billion to Medicare costs over the next 10 years, according to recent White House estimates. In 2004, general tax revenues funded 37 percent of Medicare costs. But that's expected to jump to 43 percent in 2006 when the drug benefit starts and hit 62 percent by 2030. The potential remedies to keep Medicare solvent are none too popular - raise payroll taxes, increase the age of eligibility (now 65), or hike seniors' premiums, deductibles or co-pays. Controlling costs by reducing the reimbursement rates has occurred regularly and hurts beneficiaries when doctors and hospitals refuse to see Medicare patients. Acting now on Medicare would enable Congress to deal with the problem while it is manageable and would help those nearing retirement to breathe a little easier. posted by PE Magazine Editor | 2:08 PM Permalink | Trackbacks (0) | Comments (0)
Friday, March 4, 2005 Another Year in Iraq On this second anniversary of the U.S.-led invasion of Iraq, Americans remain understandably conflicted about a war that has cost 1,519 American lives, more than $200 billion in spending and much tragedy and sacrifice among Iraqis. According to a Washington Post-ABC News poll, most Americans now oppose the war and believe it has damaged America's standing abroad. They see the growing number of nations withdrawing troops in the wake of the January elections and wonder when the U.S. will do the same. Italy, Ukraine, Poland and Bulgaria recently announced they would pull a combined 6,700 troops this year. That follows withdrawals by 14 other nations, from contingents as large as the 1,400 Spanish troops to the 51 withdrawn by Tonga. Italy's upcoming withdrawal has gained the most attention, coming after U.S. forces mistakenly killed an Italian security agent who had helped rescue a kidnapped journalist. Most Italians opposed their country's deployment in the first place, and the shooting intensified their opposition. Italy has the fourth highest number of troops in the coalition, 3,085, and their departure could be a big loss. Italy's Prime Minister Silvio Berlusconi has been under growing public pressure, with elections scheduled in less than three weeks. Even so, we were glad to see Berlusconi back off his original statement that the troops would be withdrawn in September. Instead, he said that any withdrawal would be done in consultation with allies. Future withdrawals depend upon the preparedness of Iraqi forces. The U.S. says it is halfway to its goal to train 271,000 Iraqi military and police by mid-2006, but a report by the Governmental Accountability Office questions the quality of those recruits, citing poor discipline, competing allegiances and high absenteeism. Elections have given hope to Iraqi democracy, but much depends upon the readiness of Iraqi forces - civilian security, government stability and the pace of foreign withdrawals. posted by PE Magazine Editor | 11:32 PM Permalink | Trackbacks (0) | Comments (0) |
