Panel urges benefits accounting reform
WASHINGTON – Advocates of a change in how the books are kept on future Social Security and Medicare benefits say Americans need a better sense of the government’s fiscal health.
The change, if approved, would have no impact on benefits themselves. It would, however, show just how much the social programs truly cost, which proponents say would highlight the need to find long-term fiscal fixes.
The move is the brainchild of an obscure panel, the Federal Accounting Standards Advisory Board, that is recommending how the government should maintain its books. Bush administration representatives on the board are adamantly opposed to the proposal and could kill it.
The idea behind the proposal, which was detailed Monday in a 150-page document, is to present policymakers and the public with a better way to measure the spiraling costs of Social Security and the Medicare health program for the elderly.
Social Security, for example, is running big surpluses now but faces bruising demographic changes in coming decades. Increasingly fewer workers are paying into the system for each retiree, and that will only worsen as the baby boomers retire over the coming years.
Medicare is also facing a fiscal train wreck in coming decades because of similar demographic pressure combined with rapidly rising health care and prescription drug costs.
Under current rules, the Social Security program is posted on the government’s books as a cash transaction. Taxes and interest income are on the revenue side of the ledger, and benefit payments are on the spending side. Medicare is far more complicated.
Promises of Social Security and Medicare benefits are seen by many as a binding contract. Taxpayers receive annual reports detailing their future benefit packages every year. Those who want the change argue that the promises should be put on the books right away.
“Accounting is about recording the economic substance of a transaction or in this case the economic substance of the promise between the government and the taxpayers,” board member Thomas Allen said.
However, administration and other government officials on the advisory board say such a system wouldn’t paint an accurate long-term fiscal picture. And, they say, current calculations of federal retirement benefits are in no way a legal contract like a private-sector pension plan.
For starters, there’s widespread agreement that benefits will eventually have to be curbed or payroll taxes raised to keep retirement costs from swamping taxpayers in coming decades. Benefit estimates are a political promise, not a legal one, opponents of the change argue.
“Every mature American knows that we are going to have to adjust Social Security in the future,” said Joe Minarik of the Committee on Economic Development, a business-funded think tank.
Government Accountability Office Comptroller General David Walker has been trumpeting the dangers of the looming budget crisis for years. He’s part of a minority on the board that supports an alternative plan that would characterize the sustainability of social insurance programs. It would also, in effect, revive the idea of a Social Security “lockbox” and exclude present-day Social Security surpluses from deficit calculations.
The proposal is a long way from being implemented. It’s being sent out for public comment, and a second round of comments will be required before it’s issued in final form.