AARP position on Social Security and Medicare is not realistic
COMMENTARY AARP recently announced its staunch opposition to any reductions in benefits for seniors, saying, "Our message to the super committee today is clear: No cuts to Medicare or Social Security benefits."
Due to its mission as an advocate for seniors, AARP's position is understandable. But it's hard to imagine the deficit being tamed without some cuts in those programs, given that they account for more than a third of federal spending. Fiscal year 2012 spending on Medicare and Social Security totals $1.2 trillion -- a pretty tough nut to leave intact when you have a $3.7 trillion budget and a $1 trillion deficit.
It's also hard to imagine support among the younger generation for major reductions in entitlement spending on them while exempting seniors, considering the wide gap in wealth between older and younger Americans. According to a recent analysis by the Pew Research Center, the gap in wealth between Americans over age 65 and under age 35 has widened considerably since the 1980s; the median wealth of this older American age group is now 47 times the median household wealth of the younger group, up from a ratio of just 10 to 1 in 1984.
Younger workers might not appreciate cuts in unemployment benefits to preserve Social Security and Medicare benefits. The unemployment rate for Americans age 25 to 34 was 9.5 percent in August, compared to a rate of 6.6 percent for Americans age 55 and over.
What happens when baby boomers keep working?
If the federal budget is to be tamed, all Americans will need to suffer some pain, including seniors. While some may claim that it's not fair to cut Social Security or Medicare benefits, fairness might just have to get trumped by the necessity to reduce the federal deficit.
Like most Americans, I don't want to see cuts in these benefits. But I'm realistic enough to recognize that reductions in Social Security and Medicare benefits might be necessary, and that our leaders need to look for ways to be compassionate given the financial circumstances.
How the debt super committee can fix Social Security
The AARP press release cited the dire circumstances of lower-income seniors, stating that reductions in Social Security and Medicare benefits would significantly hurt them. I agree. However, it's possible to focus Social Security benefit reductions on wealthier Americans and increase revenues by raising the taxable wage base. And Americans of all income levels can help reduce Medicare spending by taking steps to improve their health and be smarter consumers of medical care.
How the debt super committee can fix Medicare
There is no perfect solution to this vexing situation. We need to look for the middle ground in order to begin making changes that will make a difference.
Steve Vernon
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Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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