Kasich: Social Security, Medicare and Medicaid ‘have to be innovated’

At a town hall meeting Monday in New Hampshire, Kasich said that the federal entitlement programs of Social Security, Medicare and Medicaid “are going to have to be innovated” if the federal government ever hopes to seize control of a budget projected to add $7.2 trillion to the publicly held debt between 2016 and 2025.

But Kasich took one step further Monday by reminding the audience that as a member of the U.S. House he favored allowing younger Americans to divert a small percentage of their Social Security taxes into private investments accounts.

Although Chris Schrimpf, a Kasich spokesman insisted that the governor “has not proposed a new plan” for investment accounts, analysts suggest that like New Jersey Gov. Chris Christie, Kasich is demonstrating to voters he would push Congress for needed revisions to Social Security and Medicare.

“Hats off to Christie and Kasich for making this an issue,” said Robert Bixby, executive director of the Concord Coalition, a non-partisan organization in Washington that favors lower deficits. “Maybe it will force the others to have that adult conversation we need.”

Yet by even mentioning his Social Security plan from 1999, Kasich is veering toward a risky concept Senate Democrats roundly rejected in 2005 when proposed by former President George W. Bush.

“I think it was a calculated move to distinguish himself that he’s tough and can take the heat,” said Max Richtman, president of the National Committee to Preserve Social Security and Medicare, a Washington organization opposed to spending restraints in Social Security and Medicare.

“If his plan had been adopted and a large part of beneficiaries’ investments were in the stock market, they would have lost a lot of money in 2008,” Richtman said. “We’re much better off it never happened and he would be much better off not talking about it.”

Kasich, who next week will officially announce he will seek the 2016 Republican presidential nomination, originally proposed his investment account plan in 1999 during his brief run for the 2000 Republican presidential nomination.

Schrimpf said Kasich was only telling the New Hampshire audience Monday “what he has done in the past. He believes that any plan in the future needs to be a done in a bipartisan fashion. These problems need to be solved, not used to demonize political opponents.”

In its annual report released last summer, the Social Security and Medicare Boards of Trustees – whose members include Treasury Secretary Jack Lew – concluded “neither Medicare nor Social Security can sustain projected long-run program costs” and “legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers.”

The federal government last year devoted $1.5 trillion of its $3.5 trillion budget to Social Security and Medicare, which provides health coverage for the elderly. By 2025, the non-partisan Congressional Budget Office calculates spending on those two programs will consume $2.8 trillion of the government’s $6 trillion budget.

Social Security is financed by a 12.4 percent payroll tax levied on the first $118,500 of a person’s annual income. Half the tax is paid by the person while the other half by his or her employer.

Democrats such as Sen. Sherrod Brown of Ohio have backed a plan to levy the 12.4 percent payroll tax on wages greater than $118,500 annually. That would generate nearly $8 trillion in new revenue during the next 75 years and keep the Social Security trust fund solvent through 2048.

In a biting reference to Kasich working for Lehman Brothers after leaving Congress in 2000, Richtman said a “lot of Kasich’s friends from his previous employment before he came back into politics meet that cap very early on.”

By contrast, Bixby said “we can’t grow our way out of this problem even though economic growth would help, and you can’t tax your way out of the problem either. Eventually it gets down to reforming the entitlement programs.”

Whether Kasich continues to resurrect his investment account plan, he has made clear he wants to overhaul entitlements. During a campaign trip to South Carolina in February, Kasich said the next president would encounter “hard choices that need to be made.”

“With the retirement of the baby boomers, whether you are talking about Medicare, whether you’re talking about Social Security, these programs are going to need to be reformed,” Kasich said.

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