Is the Debt Ceiling debate really our biggest problem?
Posted By RichC on May 27, 2023
Once again, politicians are taking our US SPENDING and BORROWING problem right to the wire. Everyone knows that eventually politicians will just raise the debt ceiling and borrow more. The Republicans want spending cuts and the Democrats want a “clean increase” so as to be able to pay promised liabilities (previous spending) and we all know they want to spend more. In other words, the credit card is maxed out and need a higher limit so politicians can borrow and make the payment on the credit card balance they owe … and then some. 
Our fiscal insanity is enough to drive normal budget oriented people crazy.
As of 25 May 2023, the U.S. debt ceiling is $31.38 trillion, which means that the Treasury Department is not allowed to go into debt beyond a certain limit unless explicitly authorized by lawmakers. However, the amount stipulated in late 2021 has been exceeded since January 19. While the debt ceiling was not suspended this year, financial maneuvering, also referred to as extraordinary measures, has been keeping the U.S. from defaulting on its debt. — Statista.com
BUT … is this borrowing problem today really the biggest problem. Probably not. That will be Social Security and Medicare in 2031and beyond. This makes me think, perhaps those elgible for Social Security should start collecting a smaller monthly check before it becomes significantly less than promised? (currently, delaying Social Security beyond ones FRA is worth an addition 8% per year!)
As a result, the CBO is expecting that Social Security benefits will need to be cut by 31% beginning in 2031 if no changes are made to the program.
The Tax Foundation laid out the Social Security and Medicare predicament this week as Speaker McCarthy quarrels with the President Biden over cutting spending and raising the debt ceiling. If it is this difficult to agree on some restraint to spending, it doesn’t look good when it comes to the proverbial untouchable Third Rail of Politics (aka: Social Security and Medicare – its political suicide).
An aging U.S. population and a declining worker-per-retiree ratio (now only 3 to 1) have contributed to the cost of financing Social Security and Medicare. Under current law, Medicare’s Hospital Insurance Trust Fund will be insolvent by 2031, and Social Security’s Old Age, Survivors, and Disability Insurance (OASDI) Trust Fund by 2033. Without reforms, Social Security benefits would be automatically reduced across the board by 20 percent, and Medicare hospital insurance payments would be cut by 11 percent. Absent any reforms, the 2023 Trustees Report shows that a significant payroll tax hike of 4.2 percent would be required to close the current funding gap for OASDI and Medicare.
Given the dire outlook presented in the Trustees Report, policymakers must reform these programs to ensure their long-run stability. Below, we briefly review various proposals over the past decade to reform Social Security and Medicare. The list is not exhaustive, but it illustrates the possibility of tackling this issue with a measured and bipartisan approach..
Conclusion
While policymakers should also continue to focus on wasteful and counterproductive discretionary spending that continues to raise deficits, we should not lose sight of the fact that Social Security and Medicare are the largest contributors to our growing deficit and debt crisis. For too long politicians on both sides of the aisle have chosen to ignore the problem. The risks to our economy will only continue to grow the longer we wait to address them.
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