Can a Commission Reform Social Security and Medicare?
Lessons on how to overcome gridlock and special interest politics to realize bipartisan reform
Social Security and Medicare have come back into the spotlight, following President Biden’s State of the Union. POTUS ruled out any cuts to Social Security or Medicare and attacked Republican members for suggesting reforms. What POTUS failed to mention is that doing nothing on Social Security and Medicare will lead to automatic benefit cuts. Reforming these major old-age entitlement programs is not an option; it’s an urgent necessity.
Can a commission break through the legislative gridlock?
Social Security and Medicare are governed by trust funds that are on the path to insolvency. Medicare’s Hospital Insurance trust fund is projected to run out of money by 2028. Social Security’s old-age and survivors insurance trust fund is projected to be exhausted by 2033.
And this isn’t just a future problem. Medicare is the largest among a myriad of federal health care programs. Together, federal health care programs and Social Security will be responsible for 60 percent of the growth in projected spending over the next decade. That’s according to the latest projections by the Congressional Budget Office (CBO). Cato’s Chris Edwards explains:
“The main drivers of rising deficits and debt are Social Security and Medicare […]. The combined cost of the two programs for the elderly is projected to leap from $2.35 trillion in 2023 to $4.46 by 2033. By then, spending on the two programs will be four times higher than spending on national defense.”
The Bipartisan Trust Act
Senator Manchin (D-WV) has reportedly been in talks with House Speaker McCarthy (R-CA) about a commission to reform programs like Social Security and Medicare, based on the Trust Act (S.1295), a bill the Senator co-sponsored with Senator Romney (R-UT) and that has garnered broader bipartisan support. The House version (H.R. 2575) of the bill, sponsored by Representative Gallagher (R-WI), earned the support of the now-House Budget Committee chairman, Representative Arrington (R-TX).
Support among key congressional leaders bodes well for this bill becoming a key part of negotiations over the debt limit this year—despite POTUS’s apparent attempt to rule out any negotiations over the debt limit or entitlement programs. As Sen. Joe Manchin (D-WV) has reportedly stated: it’s “unreasonable” to not negotiate.
The Trust Act would direct the top four congressional leaders to appoint three members each to serve in so-called “rescue committees.” Their task: to identify reform solutions that keep major trust funds from becoming depleted. They’d report their recommendations after 180 days for consideration by the broader legislative body under expedited floor procedures.
Commission Design
A bipartisan commission moves in the right direction on making entitlement reform a reality in Congress before trust funds run out of funds. Design matters, too.
The nonpartisan Government Accountability Office (GAO) surveyed entitlement reform efforts by developed, high‐income Organisation for Economic Co‐operation and Development (OECD) countries to distill lessons for U.S. policy consideration. “Since the early 1990s, almost all of the 30 OECD countries restructured their pension programs, with a clear trend toward reduced benefits,” writes GAO. Successful entitlement reform is more likely to occur when several factors are present, including:
a broad consensus across parties and groups that reform is necessary;
the development of proposals in commissions that insulate policymakers from political risk; and
establishing iterative reform processes, such as standing commissions and mechanisms to automatically adjust benefits if adopted reforms prove insufficient to make programs sustainable.
The United States has had its own recent experience with a successful reform commission in a different politically tricky area. The Defense Department’s Base Closure and Realignment Commission (BRAC) provides important lessons on how Congress can overcome gridlock and special interest politics to realize bipartisan reform.
Closing obsolete military bases across the globe, following the Cold War, made good sense, and would allow Congress to fund other military missions and reduce the deficit. Yet, base closures resulted in the dynamics of concentrated benefits and dispersed costs. Districts in which bases were closed experienced the immediate pain of that decision while the benefits were shared among all taxpayers. It became increasingly difficult to carry out base closures as Members of Congress banded together to protect each other’s districts. In 1988, a well-designed commission to close and realign defense bases broke through the gridlock. According to Jerry Brito, then with the Mercatus Center:
“A spending commission modeled on BRAC should be focused, independent, composed of disinterested citizens who are given clear criteria for their decisions, and be structured in a way that allows its recommendations to be operative unless Congress rejects them.”
The BRAC’s recommendations had to be adopted as one package, with only an up or down vote in Congress and no amendments. If Congress approved the package, it would be submitted to the President for his review and possible veto. (Congress could override a veto with a two-thirds majority.)
Can the Trust Act succeed?
Does our current political Zeitgeist provide the conditions under which an entitlement reform commission, like the one proposed in the Trust Act, can succeed? Based on current rhetoric by some in Congress and the White House, it does not appear that there is a shared understanding that entitlement reform is a necessity. Even if such an understanding came to exist in the next few months, the Trust Act is not modeled after BRAC. A BRAC-style commission would consult outside parties, instead of members of Congress, to devise reform proposals, shielding elected officials under a cloak of “following expert recommendations.”
There’s also no enforcement mechanism. Will members of Congress have a strong enough incentive to come to an agreement, without the threat of some punitive action like automatic spending cuts? Some might argue the trust funds’ imminent depletion is incentive enough. The rescue committees could fail to send their recommendations to Congress, in a similar vein as the Simpson-Bowles commission failed back in 2010. And if they did fail, there would be no consequences other than some degree of public shaming, perhaps. That is until trust fund exhaustion would finally force legislators to do something. Their options will be significantly limited the closer that day comes.
It’s worth a try. At the very least, Congress and the administration may come closer to developing a shared understanding that entitlement reform is not only necessary but urgent as well.