Clock ticks louder on Medicare and Social Security
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
The deep recession will mean a faster road to insolvency for Medicare and Social Security, the programs’ trustees warn today in their annual reports on the plans.
Their findings won’t shock anyone, and we’ve all been reading the same grim headlines about Medicare and Social Security for decades, to the point of numbness. The only difference is that the day the money theoretically runs out is getting ever closer -- particularly for Medicare.
Social Security now is expected to begin paying out more in benefits than it collects in taxes in 2016, one year sooner than projected last year, and the trust fund will be empty by 2037, four years sooner.
As for Medicare, it’s already paying out more in benefits than it collects in taxes, and the trustees estimate the program will be insolvent by 2017, two years sooner than projected in last year’s report.
Read the summary of the trustees’ reports here.
With the government already racking up unprecedented budget deficits to bail out the economy and the financial system, the prospect of funding shortfalls in Medicare and Social Security becomes even more daunting. Will the Chinese pay for our retirement, too?
Unless some huge portion of the 76 million aging baby boomers decide to leave the country (for, say, Canada?), the options for keeping the programs solvent aren’t going to change: raise taxes or cut benefits spending, or both.
In a statement, Treasury Secretary Timothy F. Geithner said President Obama ‘explicitly rejects the notion that Social Security is an untouchable politically and instead believes there is opportunity for a new consensus on Social Security reform.’
As the trustees’ report notes:
Social Security could be brought into actuarial balance over the next 75 years with changes equivalent to an immediate 16% increase in the payroll tax (from a rate of 12.4% to 14.4%) or an immediate reduction in benefits of 13%, or some combination of the two. Ensuring that the system remains solvent on a sustainable basis beyond the next 75 years would require larger changes because increasing longevity will result in people receiving benefits for ever longer periods of retirement.
-- Tom Petruno