World Bank President Robert Zoellick said the U.S. must find a way to reduce the growth in Social Security and Medicare payments to solve its budget woes.
Zoellick, who spoke at the University of Michigan’s Ross School of Business today, said he has urged U.S. officials to revise the formula for how increases in Social Security payments are calculated. He urged concentrating on a gauge based on the cost-of-living index.
“The government has to deal with the rate of growth in entitlements,” Zoellick said. “Otherwise, frankly, it will eat up everything in the budget.”
That kind of move would also send a signal to other nations that the U.S. is serious about fixing its budget problems.
“The question is, is the U.S. really going to face up to this?” Zoellick said.
If the government makes the changes to Social Security relatively soon, the savings could take care of 70 percent to 80 percent of the program’s budget problems over the next 20 years, Zoellick told reporters after the event.
After making that change, “to move up the retirement age would seem to be the next step,” Zoellick said.
The European Union also has to find a way to solve its long-term budget problems, Zoellick said. European leaders will meet on Oct. 23 and may unveil a plan to manage their debt crisis.
Germany is the key player, Zoellick said, adding he believes that the Germans have a strong desire to make a plan to fix the problem in the long term.
“Germans are deeply committed to Europe,” Zoellick said. “This has been the heartland of Germany’s sense of self since World War II. I believe this can come together.”
Zoellick’s lecture was sponsored by the Gerald R. Ford School of Public Policy and the International Policy Center.