Reforming entitlements seems like an impossible task, but the nation's CEOs believe they have the answer. On Wednesday, the Business Roundtable, an association of CEOs of U.S. companies, released an ambitious proposal for reforming Social Security and Medicare.
Roundtable President John Engler, AT&T CEO Randall Stephenson, and Caesar's Entertainment Corporation CEO Gary Loveman proposed a plan that included raising eligibility ages for Social Security and Medicare, changing the way cost of living adjustments are made, and means-testing.
"America can preserve the health and retirement safety net and rein in long-term spending growth by modernizing Medicare and Social Security in a way that addresses America's new fiscal and demographic realities," said Loveman.
They also stressed the need for reform to happen sooner, rather than later. Engler pointed to the cost of entitlement programs, which are projected to continue growing. To continually try to make cuts to other, non-entitlement federal spending will yield diminishing returns, he said.
The ultimate goal of the plan, said Loveman, is to have the "greatest effect with the smallest number of controversial issues." Of course, controversy is unavoidable on the topic of entitlements, and some of the ideas included in their package of proposals have met with strong opposition in the past.
The Roundtable's plan, for instance, proposes raising the retirement age for Social Security to 70. Currently, the program begins providing full benefits at 66, and that threshold is scheduled to eventually move to 67. However, many have criticized the idea of raising the retirement age, saying that to do so disproportionately hurts lower-income people, who have not seen the gains in life expectancy that higher-income Americans have since the start of Social Security.
"In the debate, the magnitude of that problem has been dramatically overestimated," said Loveman, pointing to the fact that the life expectancy discrepancies may be due to deaths among younger people.
Raising the Medicare eligibility age from 65 to 70, as the CEOs propose, is also sure to generate controversy. Critics, including the powerful senior lobby AARP, have argued that it will shift costs elsewhere, including to employers and younger workers. The left-leaning Center for American Progress also estimated last year that even raising the age to 67 would leave 435,000 older Americans uninsured.
The Roundtable also proposed shifting the formula for measuring cost of living adjustments for Social Security from the standard CPI to the chained CPI, a measure that takes into account the substitutions that consumers make when prices of their preferred goods rise. That proposal, however, has been criticized as hurting poorer senior citizens.
Still, there is the possibility for bipartisan support for some of their ideas. Members of both parties on Capitol Hill have said that they would support Medicare means-testing—providing smaller benefits for wealthier program participants.
There has also been some bipartisan support for boosting private marketplace competition with Medicare. As the National Journal pointed out late last fall, both Republican Mitt Romney and the Center for American Progress have advocated adding some form of competition into the Medicare program.
While there may be room for at least a little movement, there's no doubt that getting any sort of entitlement reform package through a divided Congress is a tall order. Still, Loveman says that there's no time like the present to get started. Pointing to a weak job market and low growth, he observed, "There's nothing like impending pain to focus the mind."