Despite today's economic stress Americans are increasingly confident that Social Security and Medicare will be there for them in the years ahead. Whether this growing optimism is justified is an open question, but it may partly explain why Congress doesn't seem to have a sense of urgency about fixing these key programs despite regular warnings that Medicare will hit the wall within the next decade if some big changes aren't made.
This good news comes from the Employee Benefit Research Institute's annual retirement confidence survey which shows that 38% of workers and 59% of retirees are very or somewhat confident that Medicare will continue to provide benefits at least comparable to today's menu. A decade ago, the comparable confidence numbers were 31% and 51%.
More dramatic is the decline in the number of retirees worried about Medicare. In 1999, 48% were not too confident or not confident at all, but this figure declined to 39% this year. Worker attitudes have moved in the same direction.
There's less confidence in future Social Security retirement payments despite data showing that potential problems there are further away. Nearly a third of workers are very or somewhat confident that benefits will be there in the future as are 56% of retirees. In 1999, these figures were 28% and 51%.
Despite rhetoric from the fringes, the American political system tends to respond to the concerns of the voters, who are apparently less concerned than they used to be about the viability of Social Security and Medicare. So the politicians have moved concentrated on other issues.
From an analytical perspective, what we have here is an apparent failure to communicate. The analysts and advocates have yet to convince voters that these programs need to be fixed. Today's economic conditions, which will inevitably accelerate spending as income shrinks, may hasten the day of reckoning for these two basic programs.
But there are some interesting cross currents worth watching. One is that Americans are saving more, which could reduce their dependence on Social Security when they do retire and make proposed reforms less painful. Another is that many Americans plan to work longer, which would be doubly advantageous to Social Security (bringing in more tax revenues while delaying the onset of payments) and somewhat helpful to Medicare (which pays less when beneficiaries have employer-provided health insurance).
Whether these behavioral changes last is a crucial question. If they do, though, the somewhat surprising increasing public confidence in Social Security and Medicare may be more rational than it initially appears.