Barbara Kennelly on Social Security and Medicare Trustees Report
News Anchor: Joining us now with her reaction is Barbara Kennelly, the President and CEO of the National Committee to Preserve Social Security and Medicare. She is a former Congresswoman from Connecticut who is a ranking member of the Social Security sub-committee and a former counselor to the Social Security Administration.
Miss Kennelly, welcome to Bloomberg news, and Lindsey’s report painting a very dire picture. The trustees saying that Social Security fund would be depleted by 2037.
Barbara Kennelly: Well Earl, first of all, all this reporting on Social Security is dire. The fact of the matter is that last year the trustees said that Social Security could pay full benefits to 2041. Now they’re saying 2037. Would you notice that that’s three decades away? The whole program has been planned for the long term to have these kind of economic cycles going up and down. In the 1990s Social Security could only pay up to 2000 say. But no, Social Security is not going bankrupt. Social Security has a surplus. It can pay full funding till 2037, that’s what the trustees are going to tell you. And then after that…
News Anchor: Where is the disconnect between what you’re saying and some of the things that Lindsey was telling us over in that report?
Barbara Kennelly: Well, Lindsey is reporting as people report and say, “Hey, the number went from 2041 down to 2037″. And yeah, that is a drop and are we surprised? No, we have a recession. Are we surprised that tens of thousands people have been laid off and are not paying into the payroll tax. But the Social Security program has been designed specifically to have these economic going up and going down. I was on the committee in 1983 the last time we reformed it. We raised the payroll tax, we raised the age because we knew the baby boomers were coming.
So no, Social Security is not going bankrupt. Do we have a problem right now? We have a fiscal problem. We’ve got a deficit problem. We don’t have a Social Security problem because we have that surplus. Think of the good years we had in 2005, 2006, 2007, 2008. So much more money was coming in to Social Security from payroll taxes than was going out. That built up the surplus. So that’s the base we have right now. That’s why we can go up to 2037 and say Social Security can still pay its benefits.
News Anchor: Are you saying that Social Security is not in need of reform?
Barbara Kennelly: Oh no, I’m not. And you said that at the beginning of the program, no. When you said that Social Security can only pay full benefits till 2037, of course we can address those out years. But don’t forget hundreds of thousands of people are working, paying in. People act like everything stops. No, there’s all sorts of ways that you can take a little here, a little there and you should do it now rather than later so people can plan out for their futures. No, I think Social Security should be reformed, but I don’t think is Social Security should be used as a scapegoat; that now we have all these problems in the economy, “okay, let’s cut benefits, let’s raise the age”. That’s not the right way to go.
News Anchor: Well, the same question I guess applies to Medicare. What type of reforms might be needed for Medicare?
Barbara Kennelly: Oh, let me tell you something. You’re not going to get me to defend Medicare the way I am defending Social Security. Medicare has serious problems because there are serious problems in our healthcare system and if Barack Obama reforms the health care system, Medicare will do good…
News Anchor: Miss Kennelly, I’m sorry to cut you off, but treasury secretary Tim Geitner is speaking right now from Washington, let’s go to that live here on Bloomberg television.
Tim Geithner: … of the chief actuaries, Steven Godson, Richard Foster and the whole hard work of their staffs. Through generations, tens of millions of Americans have been able to count on Social Security and Medicare as guarantees that they will be able to live out their senior years in economic dignity and with health security. This year’s trustee reports once again remind us that the longer we wait to address the long term solvency in Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be. The sooner we come together to make the difficult but achievable changes needed to strengthen the solvency in Medicare and Social Security, the more time we will give the American people to plan and to adjust and the sooner we’ll be able to ensure that these vital programs will be as important for generations to come as they are today.
That’s why even as this President has focused on pulling our nation out of recession, he has made clear his commitment to work in a bipartisan way to address the long term health of Medicare and Social Security. Reestablishing fiscal sustainability, fiscal responsibility, as well as the strength of these two vital programs is essential to the economic and health security of our country. The Medicare trustees report makes clear today that there is no more important long term fiscal policy measure than gaining control of the growth of Medicare costs by delivering health care services more efficiently. These savings can only be achieved in the context of a larger effort to control healthcare costs and improve quality more generally. The most effective entitlement reform measure would be a major health reform that helps bring down the growth rate of national health care spending.
This administration is committed to working with the Congress to find ways to control runaway growth in both public and private healthcare expenditures while helping ensure that all Americans receive the high quality, affordable health care that they deserve. The recent commitment of major health stakeholder to help lower the annual growth rate and costs by 1.5% points represents a crucial step in that direction.
Now the trustees’ reports come to the following conclusion. Let me just summarize these briefly:
First: The Medicare program’s financial challenges are larger and more imminent than those of Social Security. Medicare faces demographic challenges, rapidly growing healthcare cost and the short term outlook has been hurt by the recession. Medicare’s annual cost is 3.2% in GDP in 2008, or nearly 3 quarters of Social Security’s, but they’re projected to surpass Social Security expenditures in 2028 and to reach 11.4% of GDP in 2083 compared with only 5.9% for Social Security.
Medicare’s hospital insurance trust fund is projected to become exhausted in 2017, two years earlier than projected in last year’s report. The cost of Medicare supplemental medical insurance to the federal government is projected to increase rapidly. General revenue financing for SMI is expected to increase from about 1.3% of GDP in 2008 to over 4.7% GDP in 2083 with continuing increases beyond those 75 years.
Now, this year’s Social Security report projects that the trust fund is going to be exhausted in 2037, four years earlier than the trustees projected last year. This change is primarily due to the economic recession, recent data that prompted a small downward adjustment to the projected level of real GDP, and the fact that our citizens on average are projected to live longer lives.
Nevertheless, Social Security can continue to pay full benefits for nearly 30 years and cover approximately 75% of scheduled benefits thereafter. Now to ensure that these critical programs are there for future generations, the President and this administration are taking the following steps.
First: we’re intently focused on bringing the current economic and financial crisis to an end and getting on with recovery. The return of robust growth will help solve some but my no means all of the financial problems of Social Security and Medicare.
Second: we’re reforming the health care system via cost control and improve quality which will help strengthen the Medicare program and improve the long term fiscal position of the United States.
Just yesterday, as I said, the President working with major healthcare providers helped secure a commitment to reduce future growth in costs of care by more than 2 trillion dollars. These voluntary efforts will complement the President’s efforts to enact comprehensive reform to assure quality and a affordable health care for every American. And the administration is committed to working with Congress to find ways to control runaway growth in both public and private healthcare expenditures while as I said ensuring that all Americans receive the high quality affordable care that they deserve.
And finally, after we have passed healthcare reform that puts our nation on a path of lower growth in healthcare costs and more expanded and more affordable coverage, this President will work to build a bipartisan consensus to assure the long term solvency of Social Security.
The President doesn’t believe that Social Security is untouchable politically. He believes there is an opportunity now for a new consensus on Social Security reform. The steps the administration is taking towards comprehensive healthcare reform, towards economic recovery and towards deficit reduction over the medium term will all help preserve Social Security and Medicare for future generations and it will help produce a more balanced and more sustainable growth that improves the lives of all Americans, both working Americans and retirees.
News Anchor: We’re now back for final thoughts on the issue of Social Security and Medicare with Barbara Kennelly, the President and CEO of the National Committee to Preserve Social Security and Medicare. Miss Kennelly, again of course our apologies for cutting in on your final answer but we had to go to Secretary Geitner. You were listening in, I was wondering if we might get your thoughts.
Barbara Kennelly: Oh, I thought his statement was excellent. I am thrilled that the President keeps saying he is going to do healthcare reform, and then after he does healthcare reforms he is going to look at the long term problem of the out years of Social Security and let me tell you something: my four million members and supporters want to work with him. We don’t only care about Social Security for ourselves, we care about it for our children and our grandchildren. I thought that the statement was excellent. I thought the attitude was excellent, and I want to once again say that they did say that Social Security can pay full benefits for the next 30 years.
News Anchor: What would your organization be pushing for when this debate is finally joined?
Barbara Kennelly: Well, what we’re really worried about is when you hear about entitlement reform. Entitlement reform, to a lot of people, means cuts. And what I don’t want to see is… Social Security benefits are very moderate, about $13,500 a year. And so when you talk about cutting benefits I get very nervous. You talk about raising the age, yeah, we have to look at that but right now it’s up to 67 and I’ll tell you a lot of people who are 65, 66 and 67, there’s no jobs out there for them, so there’s a lot of work to be done. But I thought that the treasury secretary’s remarks were excellent and I look forward to working with this administration.
News Anchor: How do counter those who have been calling for the privatization of Social Security.
Barbara Kennelly: I gave my life to it for about five years. Aren’t we glad now that we didn’t put some of the Social Security trust fund’s money into Wall Street? Already peoples’ 401Ks are down, the worth of their house is down. I’ll tell you something: privatization is over. That thought we don’t even get. It’s looking at the entitlement reform and what some people really want to do is get rid of the entitlements. So there is always a fight. Ever since Heckler and Roosevelt there have been enemies of Social Security, they’re going to look at what the surplus is just a year or so in the future, not long term surplus. And that has gone down because of the recession. People aren’t working.
News Anchor: Miss Kennelly, we have about a minute left. I was wondering what kind of benefits for Social Security and Medicare are you and your organization willing to give up to help reform the two systems?
Barbara Kennelly: I was there in 1983. I was on the Raise & Means committee doing the reform. And it was a combination of many, many changes in the Social Security system. The Social Security system is very complicated. Everybody’s Social Security is different, it is computed differently. And so yeah, you have to look at what’s coming in and what’s going out. We have what’s called the [...] where you do a certain amounts to become benefits. There are ways you can do it. Are they going to have to raise the age? I don’t know. Maybe, maybe not. But there are all sorts of things that can happen. It goes into a package and that package can be a pass. What I don’t want to see is just benefit cuts and raise the age and not looking at the whole program.
News Anchor: Barbara Kennelly, President and CEO of the National Committee to Preserve Social Security and Medicare joining us from Washington, thanks.
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Barbara,
Please do not agree with anything Pres Obama says. He speaks out of both sides of his mouth when he has to. He also lies constantly. He is for a one payer health system then he is not. He is the most disgusting president I have ever seen. A thousand times worse than Jimmy Carter, and Woodrew Wilson combined. A communist, socialist combined. Just disgusting. Get as far away from him as possible and I may support you, but not now.
IT IS A BIG DEAL (no COLA’s this year)…..BIG enough to get Obama thrown out of office along with a bunch of Democrats starting THIS NOVEMBER.
I am FORCED by “economics” to work at 71 because my CURRENT SS + EMPLOYER RETIREMENT IS NOT ENOUGH TO LIVE ON.
THAT’S AMERICA…..turn you into a SLAVE and ROB the crap out of you when you are older.
E.g. National Fuel Gas in Buffalo NY has been PRICE-GOUGING homeowners for YEARS and the “politicians” LOOK THE OTHER WAY. My current “bill” was at a RATE 600% over the current wholesale market price of natural gas. I guess that’s their “answer” to the “downturn”!
My “City of Buffalo” WATER BILL was $179.00 for the last THREE MONTHS because she has a SMALL garden in the back yard (about 10′ X 7′) and we live on Lake Erie with the water delivery system PAID FOR by my ancestors YEARS AGO.
Then there is my daughters “student loan” for something that is a HUMAN RIGHT and should NOT COST HER OR ME A DIME.
I could go on for PAGES……why bother.
“America” is GONE.
I don’t know how millions of seniors are to make ends meet anymore, when so many of them are already in financial jeopardy. Now we get no cost of living increase, yet all our other expenses are going up? What can we do to change this?
Everyone wants to blame the President but for 8 years you had a President who destroyed lied to and turn a surplus if to a deficet. He allowed illegals to work here which means millions of dollars sspayments not being paid by the workers and the employer. This is why the ss is in trouble. if you want blame someone get real it’s the Bush’s that have destroyed this country Obama does not run this country by himself