If you're currently receiving Social Security checks or will receive them soon, Republican hopeful presidential candidate Nikki Haley doesn't want to cut your benefits. But for younger people, Haley believes cuts are necessary.
At a Myrtle Beach, South Carolina campaign rally held earlier in March, Haley said seniors should receive the Social Security and Medicare benefits they've been promised. But she suggested that benefit reductions should be on the table for people like her children, who are both in their 20s.
Haley said:
Those are the ones we tell the rules have changed -- anyone new coming in this system. That's how you do entitlement reform. You let them know, it's not going to be there for you anyway because Social Security goes bankrupt in 10 years, Medicare goes bankrupt in five.
Image source: Getty Images.
Are Social Security and Medicare really going bankrupt?
Not quite. Haley is correct in that Social Security and Medicare each have a solvency crisis, but the programs aren't exactly going bankrupt. Both entitlement programs are paying benefits at a faster rate than they're bringing them in through payroll taxes. Social Security's shortfall is primarily due to demographic shifts -- fewer workers paying in and more retired workers taking out -- while rising healthcare costs are largely to blame for Medicare's deficit.
The latest Social Security trustee's report projected that the Old Age and Survivors Insurance Trust Fund, which pays Social Security benefits to retired workers and their survivors, will be depleted by 2034. At that point, Social Security would only be able to pay 77% of the benefits it's promised through payroll taxes.
The Hospital Insurance (HI) Trust Fund, which funds Medicare Part A, is scheduled to burn through its reserves even sooner -- by 2028. After that, Medicare would still generate enough income to pay about 90% of benefits.
Various proposals have been floated over the years to shore up funds for both programs. For Social Security, proposals have included eliminating the taxable earnings cap, reducing benefits for high earners, and raising the full retirement age. Potential fixes for Medicare have included reducing benefits, raising tax revenue, crediting savings from prescription-drug reforms to the Medicare trust fund, and reducing provider payments.
What is Haley proposing?
Haley hasn't been too specific about the changes she's proposing for Social Security and Medicare. But the former South Carolina governor made it clear during an interview on Fox News earlier this month that she believes raising the retirement age for younger people is necessary.
"What you would do is, for those in their 20s coming into the system, we would change the retirement age so that it matches life expectancy," Haley told Fox News host Neil Cavuto.
The current full retirement age is 67 for those born in 1960 or later. Haley didn't offer specifics about what she believes the new retirement age should be.
When Cavuto asked Haley for specifics about what age ranges a new retirement age would apply to, Haley said:
It's the new ones coming in. It's those in their 20s that are coming in. You're coming to them and you're saying, 'The game has changed.'
In 1983, Congress passed major Social Security reform that President Ronald Reagan signed into law. That legislation gradually increased the full retirement age from 65 to the current 67.
