Cutting Entitlement Programs (Editorial)

Remember David Walker? He was the comptroller general of the United States and head of the Government Accountability Office until he resigned in frustration earlier this year.

Like him or hate him – and there are plenty of reasons for either feeling – he was an outspoken gadfly and watchdog who preached fiscal responsibility, which often upset Republicans and Democrats alike.

Testifying before the House Budget Committee last month, the former GAO boss argued for cuts to Social Security and Medicare for future retirees.

A recent report from the Center for Economic & Policy Research, a “progressive” Washington research center, shows that, because of the collapse of the housing bubble, the vast majority of near retirees have accumulated little or no wealth.

That means they will be almost completely reliant on Social Security and Medicare to support them in their retirement years, the report said.

The study, “The Housing Crash and the Retirement Prospects of Late Baby Boomers,” analyzed the wealth holdings of families headed by people between the ages of 45 and 54 in 2004 and projected the wealth of families headed by people who will be in this age group in 2009.

The findings looked at three scenarios: real house prices remain at current levels, real house prices fall by 10 percent, or real house prices fall by 20 percent.

The report projects that if house prices were to stay the same through 2009, the median household would have 24.7 percent less wealth than the median household in this age group in 2004.

If real house prices fall 10 percent, the median household would see a 34.6 percent loss in wealth compared with the median in 2004 and a 45.6 percent falloff if prices fall by 20 percent.

Numerous entitlement programs exist that could and should be slashed, but should Social Security and Medicare, given the current economic doldrums?

While now may not be the time to cut them, the day is coming – the Social Security Administration says it will happen in 2041 – when payroll taxes will have to be increased, the benefits of today’s younger workers will have to be cut by 22 percent, or some other source of revenue will be required if its payouts continue at its current schedule.

With so much opposition to privatization, Congress and the president appear to be at a loss for ideas on how to fix it, but they must come up with some sustainable system that protects and current and funds future retirees.