The best way to reform Social Security is for "Congress, lawmakers, and the president to get together and stop pretending that Social Security is fine," Heritage Foundation economist Romina Boccia tells Newsmax TV.
"With a new commissioner or without, it is really important for lawmakers to understand that the longer we wait to make these important benefit changes, to make sure we preserve Social Security for current and future generations, the more drastic those decisions will have to be in later years and the more aggressive benefit changes would have to be made," Boccia tells Newsmax in an exclusive interview.
"We cannot wait. It is not an option to continue to procrastinate. It's very important that Social Security be reformed now."
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Social Security will run through its trust fund by 2033, Treasury Secretary Jacob Lew said in an annual report on the program in May. Medicare is expected to deplete its trust by 2026, he said.
Retiring baby boomers continue to be the major source of stress for the two entitlement programs. Almost 10,000 baby boomers are reaching retirement age — 65 to 67 for Social Security and 65 for Medicare — each day and qualifying for benefits.
Republicans and Democrats have been unable to agree on how to fix the finances of both programs, which accounted for about 38 percent of federal spending last year.
Lew's report comes as President Barack Obama seeks to fill the top job at the Social Security Administration. Michael Astrue, a George W. Bush appointee, stepped down when his six-year term expired in January.
"Social Security can make it to 100, 200 — and even last much longer than that — but we do need reforms," Boccia tells Newsmax. "The situation is as dire as it is. In fact, it is even more dire, because Social Security is considered to be legally solvent for the next 20 years.
"But what you need to keep in mind is that the trust fund is full of IOUs, so that spending still represents a liability for taxpayers that is already factored into the national debt.
"The cash flow deficits have started already, which is why reform is urgent now," Boccia adds. "We should not wait until 2033.
"If we think about Social Security's original purpose, it was to protect against old age poverty," she says. "And now 70, 80 years later, the program looks entirely different.
"For example, we're paying benefits to about 47,000 millionaires a year, while seniors who have worked their entire lives, paid into Social Security, still live below the poverty level."
Boccia says proposals to raise payroll taxes are greatly flawed.
"First of all, it's a short-term fix. It buys you about 11 more years of good cash-flow years, but after that you're back in the deficit years, which is where we are now.
"Plus, Congress spent any surplus that Social Security collected in the past on other programs, so we can expect the same thing to happen now," Boccia adds. "So it would allow Congress to spend more now but it wouldn't help Social Security into the long term — and that's why benefit reforms are necessary."
One such reform is being pushed by Obama himself, a change in how cost-of-living adjustments tied to the Consumer Price Index are calculated.
The president wants to use a "chained CPI," a new formula that would result in a slower measure of inflation than the standard used now.
As a result, annual Social Security cost-of-living adjustments would likely be lower, making benefit payments smaller. The change would save an estimated $100 billion in Social Security payments over 10 years.
Boccia tells Newsmax that she endorses the "chained CPI" method.
"Currently, many seniors are receiving windfall benefits. They are receiving higher benefit increases than are necessary to make sure that they're whole, that inflation doesn’t reduce their benefits — and that really is the purpose of a cost-of-living adjustment.
"By having this excess benefit now, it is draining the program sooner, which is bringing about the date when Social Security will no longer be even legally solvent — and that would mean across-the-board benefit cuts for all seniors by about 23 percent.
"That would hurt those seniors who are very old who have maybe outlived all of their other savings and are now completely dependent on Social Security," she says.
Boccia has two other ideas for reforming Social Security.
"Americans are living much longer now, and the program has not adjusted to that — so Americans tend to draw benefits for much longer.
"One fix is to increase the early and full retirement age, and then index both to longevity so we have a predictable way of knowing, as Americans live longer, how the program will adjust for that."
In addition, "We really ought to think about how we can target benefits more directly toward those seniors who have the greatest need," she says. "That means bumping up some seniors' benefits who currently live below the poverty level with a flat benefit, while seeing that those who can do without — millionaires — have their benefits phased out over time."
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