Medicare, Social Security running out of money faster

Medicare's trust fund will run dry in 2024, five years earlier than forecast just last year, and Social Security's will be exhaused by 2036, adding fuel to the debate over cutting one or both programs to reduce annual budget deficits.

The government programs' trustees issued their gloomy findings today amid a rancorous debate in Washington over the future of the New Deal and Great Society programs, which eat up huge and growing shares of the federal budget.

The pessimistic outlook was hastened since the last report in August 2010 by the continued impact of the recession, which has sapped revenue and increased spending.

Both programs are running in the red and will continue to do so, the trustees said. Medicare is paying out more in benefits each year than it takes in in taxes. Last year, its trust fund wasn't expected to run dry until 2029.

Another factor: longevity. The report projects that men who turned age 65 in 2010 can expect to live another 18.6 years, an extra half-year compared to last year's report. Life expectancy for women at age 65 is projected at 20.7 years, up from 20.4 years in 2010.

"Americans are living longer, and health care costs are continuing to rise," Treasury Secretary Timothy Geithner said. "And if we do not do more to contain health care costs, our commitments will become unsustainable."

Social Security has longer before its trust fund runs dry in 2036, but it ran a deficit last year for the first time since 1983. Now it's projected to run deficits every year; last August, the trustees had projected a few more years of surpluses from 2012-14.

If the trust funds run out, the programs no longer would be able to pay full benefits. Social Security would be able to pay only about 75% of promised benefits through 2085. Medicare could pay 90% starting in 2024, dropping to 75% in 2045.

The Social Security Disability Insurance program is in the worst shape. Its trust fund will run out before 2018, the trustees reported, forcing it to borrow funds from the retirement insurance program.

The Medicare figures are suspect, because they rely on billions of dollars in savings projected under the health care law signed by President Obama last year. Without passage of that law, the Medicare trust fund would be projected to run out in 2016, just five years from now.

The savings in the law depend on many factors, such as cuts in payments to doctors that Congress habitually sidesteps, as well as improvements in doctors' and hospitals' productivity. There is no guarantee those will happen; in fact, the physician payment cuts surely will not.

Richard Foster, Medicare's chief actuary, mentioned these and other factors in a separate opinion at the end of the lengthy report which, in essence, calls its conclusions into question:

The financial projections shown in this report for Medicare do not represent a reasonable expectation for actual program operations in either the short range, as a result of the unsustainable reductions in physician payment rates, or the long range....

The economic outlook remains more uncertain than usual. Due to the sensitivity of hospital insurance trust fund operations to wage increases and unemployment, the current slow recovery from the recent recession adds a significant further element of uncertainty to the trust fund projections.

Unlike past years, the annual report could have an immediate impact on the most important domestic policy issue pending before President Obama and Congress -- how to reduce annual budget deficits and get a handle on the nation's $14.3 trillion debt.

Geithner has said that debt ceiling must be raised by Aug. 2, or the country would face an unprecedented default on its obligations. Republican leaders in Congress have said they won't vote to raise the debt ceiling without substantial spending cuts. House Speaker John Boehner wants $2 trillion.

"For decades, politicians in Washington, D.C., have looked up at the size and scale of the fiscal challenges facing our country, particularly in Medicare, and chosen to kick the can down the road," Boehner said. "Today's trustees report is another reminder that we've run out of road. With tens of millions of Baby Boomers beginning to retire, this is the moment to act. The time is now."

The GOP leaders have ruled out tax increases, but the White House insists they remain on the table. That could include raising the Social Security payroll tax cap or increasing the Medicare tax that pays for hospital insurance.

See photos of: Barack Obama, Timothy F. Geithner

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Consumer Spending Rises in March, Added Money Going Toward Gas

Associated Press

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WASHINGTON -- Consumers spent more in March, but most of the added money went toward higher gas prices. 

Retail sales increased 0.4 percent last month, the ninth consecutive gain, the Commerce Department reported Wednesday. The increase shrank to a slight 0.1 percent when sales at gasoline stations were excluded. 

The biggest decline in auto sales in more than a year also pulled down overall sales. When taking out sales at gas station and of autos, retail sales rose 0.6 percent. 

Economists are hoping that a payroll tax cut and brighter outlook for job growth will keep consumers shopping this year. Consumer spending accounts for 70 percent of economic activity. 

But analysts worry that the recent spike in energy prices will not leave shoppers with much left over to spend on other goods and services. The nationwide average for regular gasoline is now $3.80 a gallon, up from $3.56 a month ago, according to the motor club AAA. 

For March, sales of autos dropped a sharp 1.7 percent, the biggest decline since February 2010. 

However, some of the weakness was because General Motors scaled back incentive offers. 

Economists believe the outlook for auto sales for the rest of this year remains bright, given improving job prospects. 

Shoppers did spend 3.6 percent more at furniture stores. Sales were also rose at appliance stores and specialty clothing stores. Sales at general merchandise stores, the category that includes big retailers such as Wal-Mart, rose 0.4 percent. 

However, sales at just department stores such as Macy's saw a 0.2 percent drop in March. A survey of major retailers from Costco to Victoria's Secret had reported surprisingly good sales for March. Analysts said the gains would have been better but for the fact that Easter does not come until late April this year.

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Newark school woes transcend money

By Todd Plitt, USA TODAY

Simone Jacobs expresses concerns about charter schools at Science Park High School last month.

EnlargeCloseBy Todd Plitt, USA TODAY

Simone Jacobs expresses concerns about charter schools at Science Park High School last month.

Newark Mayor Cory Booker quickly raised $43 million in matching donations. But what's followed has been less rosy:

•The superintendent left in February after being fired by Republican Gov. Chris Christie; a new leader hasn't been named. The state has controlled Newark's schools since 1995.

•A plan to close some schools and to let charter schools share space with public schools infuriated parents — especially after it was revealed the plan was written by a consulting firm founded by New Jersey's acting education commissioner.

• Booker has been criticized for not revealing enough about the sources of the $43 million and for spending $1 million on a survey of parents' thoughts on school reform.

"It's like they have somebody trying to figure out how they can screw this up the most," says Richard Cammarieri, a former school advisory board member. "Everything they've done is totally tone deaf."

So has anything changed for Newark's 40,000 schoolchildren since the Facebook gift?

"A lot," Booker says. "Suddenly Newark went from sort of a status quo (school) district to a district that is focused on reform."

"Absolutely not," says City Councilman Ras Baraka, Booker's political rival and also a high school principal. "The real on-the-ground stuff, no."

Only about half of Newark's high school students graduate, and half of those do so through a special test for those who flunk the standard proficiency exam.

Booker contends that Newarkers are ready for more charter schools and longer school days and support efforts to weaken teacher and principal tenure rules. Those changes "all poll very dramatically well in our city — but we've never taken dramatic action on anything," he said in an interview. "Now, from the governor's office to the school board, you have a lot of alignment on what it's going to take to make those reforms."

Little agreement has been on display at raucous public meetings where parents, students and teachers have opposed proposed changes.

"These are people's babies, and you don't just make decisions about people's babies without engaging and having some sort of communication with the parents," says Shavar Jeffries, school advisory board president.

Critics of the current plan say good changes already underway will be neglected if the focus is on charter schools. They cite the three-year-old Global Village School Zone, a network of seven schools that offers both education and social services. Brick Academy is a school run by teachers.

"If you know there are pockets of success in this city, you get those people and ask them what's working," says Michael Iovino, a history teacher at a high-performing magnet school.

Charter schools " are like the new Air Jordans," says Carol Tagoe, the mother of three children in a Global Village school that is being merged with another underpopulated school. "Everybody wants to get them, and then when the dust settles, we realize that was a big mistake."

Charter school parents object to being called anti-public. Kimberly Barton's third-grade son Kymor goes to a charter that is planned to share space with a public school. "We just want to make sure we have someplace to go next year," she says. "The problem is that everyone thinks that charters are trying to take over, which we're not."

Booker says his plan involves far more than charters. In September, more schools will have extended school days, principals will have more authority, and new public schools will replace badly performing ones, he says.

But the mayor has been challenged on his legal authority to implement changes — despite Christie's announcement that Booker is in charge of fixing the schools.

"There is a lack of clarity on what exactly the mayor's role is," says Jeffries, the school advisory board president.

Booker "should be involved. That's appropriate," Baraka says. "There's a difference in being involved and controlling it. ... People look at that and say, 'Back up, back up."

Booker, however, is not backing up. When plans are in place, the city will push for return of control from the state to the school district. And then, perhaps, there will be a push for mayoral control of the schools.

"It's very problematic when you have a big district to try to run it with a large group of people, many of whom have conflicting interests," Booker says.

For the moment, the power struggle goes on. The first grants of Facebook money have been given to start five new public high schools, including one intended for gay students. Last week the school advisory board voted against opening the new schools. The district plans to open them anyway. Students are already signing up.

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Big Money Trumps Base Support for Obama’s Re-Election Campaign

FoxNews.com

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The timing of the start of President Obama’s re-election bid had as much to do with money as anything else.

By starting at the beginning of April, Obama will be able to post an impressive fundraising number for the second quarter of the year. It’s a strategy that has worked for him before.

In 2007, Obama cast doubt on the certainty of Hillary Clinton’s nomination by out raising her between April 1 and June 30. She brought in $27 million compared to his $32.5 million and her campaign never really recovered the cloak of inevitability.

This time, it’s Obama who wants to prevent any doubts from being cast on his chances.

With deep corporate connections and the power of incumbency, Obama could handily double his haul from the same period in 2007. Even if leading Republican contenders Mitt Romney, Tim Pawlenty and Haley Barbour post huge numbers by the end of June, they will still pale in comparison to what Obama will be raking in.

Money is the only logical reason for Team Obama to start the campaign this week because otherwise, the timing was dreadful. Announcing that the drive for 2012 has begun right in the middle of an acrimonious debate over a government shutdown and as questions mount about the war in Libya was tough. Presidents generally like to declare for a second term while they are on the upswing, not when they are skidding to new lows in job-approval polls.

This may have been why Obama went for a

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