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  • Trustees Report: Social Security and Medicare are Unsustainable

    The Social Security and Medicare Trustees today released their annual reports on the fiscal condition of the programs, and the situation for these programs is still dire.

    Although the programs’ fiscal health hasn’t worsened since last year, both programs are still on an unsustainable course. Most significantly, the programs are running trillion-dollar shortfalls because they’ve promised more benefits than they can afford:

    • Social Security has a $7.9 trillion shortfall (up $0.1 trillion from last year), which means the program would require $7.9 trillion in cash—today!—to afford its promises. Alternatively, closing that gap would require payroll taxes to rise immediately and permanently from 12.4 percent of earnings to 14.24 percent. For a worker earning $50,000, that’s a $920 tax increase.
    • Medicare has a $30.8 trillion shortfall. To put that into perspective, that is more than twice the size of the entire U.S. economy, which means it would be impossible to infuse enough cash into Medicare to fix the program. However, the assumptions used to arrive at this number give new meaning to the word optimistic.

    The good news for Social Security is that the basic position of the trust fund is unchanged: The trust fund, which is currently running deficits and will rebound by 2012, will begin to run deficits in 2015, and the whole piggy bank will be exhausted 2037. The bad news for workers, as the Trustees indicated, is that the main reason these dates are unchanged is that workers will be paying more in payroll taxes thanks to Obamacare, which has made a larger share of earnings subject to Social Security taxes.

    The good news for Medicare—at least in theory—is that Obamacare is assumed to extend the life of the Part A Hospital Insurance trust fund by 12 years and bring the costs of outpatient Supplementary Medical Insurance (Part B) and drug benefits (Part D) down. The bad news is that it will never happen.

    Indeed, the Trustees noted that they are skeptical of their own savings projections:

    [Much of Medicare’s projected improvement] is premised on the assumption that productivity growth in the health care sector can match that in the economy overall, rather than lag behind as has been the case in the past. This report notes that achieving this objective for long periods of time may prove difficult.

    In other words, not so fast declaring victory for Medicare and Obamacare. If these assumptions turn out to be wrong—as the Trustees suggest is highly likely—the situation for Medicare will be far worse than these numbers reveal. It would be a mistake to accept them at face value.

    With both programs on an unsustainable course, urgent reform is necessary. Although the Trustees report modest progress for these programs this year, we must not lose sight of the real long-term challenges these programs face and the $39 trillion debt future generations will inherit if we fail to act now.

    Posted in Economics [slideshow_deploy]

    13 Responses to Trustees Report: Social Security and Medicare are Unsustainable

    1. Billie says:

      If the government really cared about the best interest of the people, social security would be available to those who've paid in with no concern to it's availability. Why isn't this something of obama's "change?" Rightly providing the service to people who paid for it Why is there a higher concern to a people of a religion with low self-esteem? To build self esteem is up to the individual! Not Obama and American tax payers!! To promise social security to those who paid for it, is to keep the promise, if Obama's governing was fair, honest and dignified. bwkb.

    2. Pingback: Team Obama blows it again « Don Surber

    3. Virginia McCarthy says:

      First of all, I resent Social Security being labeled an "Entitlement" program. This description is relatively new, perhaps within the past 2-3 years. It was my money that was taken out of each and every paycheck since college. The govenment was supposed to secure the funds, let it grow interest, until I was ready to retire. But, instead, both Republicans and Democrats have been dipping into out Social Security funds for decades. And now they have the audacity to refer to it as "Entitlement." I'll tell you what entitlement is, billions spent on the Welfare Programs, free housing, free medical for people who were able bodied and should have been working all these years, instead of receiving govenment handouts at the expense of hardworking Americans. Let's just set the record straight on this!

    4. Steven Barrett says:

      Simple solution, except for liberals who stubbornly cling to abortion rights: Do whatever we can to stop the birth dearth and raise the birth rate. Millions of dollars have been spent on researching SS's problems to death wnen the answer is right before us. It shouldn't take a computer whiz, policy wonk, etc., to see what our killing off an estimated 50,000,000 people since January 1973 has done or would've done to any nation's social security system(s.)

    5. dickbradshaw says:

      why do/nt they put the monies back into social securty that kennedy stold from us / then we would never have to worry agin/ then leave it alone

    6. Pingback: Obama is breaking Social Security « Don Surber

    7. Steve, Carpinteria, says:

      SS discriminates and denies equal protection against single and unmarried people because they are denied survivor benefits. How did people survive before FDR and social security? Privatize retirement accounts…and return to the principal of self reliance and individual responsibility. Absent SS taxes and bureaucratic overhead, individuals would have ample $$ to plan for their retirement. Charities would likely benefit by increased donations and fill any need abandoned by the government. Waste, fraud and abuse would vanish.

    8. Don Harper, Lubbock, says:

      The "trust funds" have been looted – the money isn't there. People are living much longer than they did 50 years ago, and life expectancy will go much higher with medical and genetic advances. Raise the retirement age (mine is already 66 yrs, 8 mos), raise the cap (a little), means test (a little), raise the tax rate (a little), and don't put the revenue into the general fund. This problem has been obvious for a long time and politicians have ignored it. It can't be ignored any longer. If you don't like my suggestions , and I'm not real fond of them, myself, try Paul Ryan's Roadmap for America. That is true reform.

    9. Pingback: Media In Politics » Blog Archive » Social Security: Government ‘Ponzi”Scheme Turns 75 with $41 Billion Shortfall

    10. GMA213 SD says:

      If a generation of potential American workers had not been aborted, some 52 million, our tail would not be in the crack it is in now.

    11. Frank Wm. Moore says:

      The Social Security System WOULD be sustainable if the the pinkos would take it off budget as it oriiginally was until that fool LBJ starting using it in the general fund.

      SSS should only be used for what it was originally set up to do: assist retirees in their time of need.

      Remove ALL other benefits such as assistance to drunks, dopeheads, etc. SSI should NOT be part of the SSS.

      The list of things that were added to SSS that should not be part of it but this will give one an idea of what is really wrong with SSS.

    12. Dennis, Jacksonville says:

      Only fools would continue to support a plan to give money to politicians to keep and invest until their retirement. It has failed in the past. It will continue to fail in the future. The concept of a politician mamaged retirement fund is flawed. Imagine a politician looking at a large pile of money and not salivating and working to gain control of the pile. Politicians will spread any money they can get to obtain the most votes and maintain their position of power and influence. The only solution is to develop a plan to move to private investment for retirement.

    13. Denise Holmes, Ohio says:

      The word "entitlement" is a Republican construction in order to associate such programs as Social Security/Medicare with the welfare program. It is designed to cause rage in individuals who feel that some are demanding "entitlements" (i.e. freebies) when in fact anyone on Social Security has PAID into the program. This was not done by Obama…but by Republicans (Reagan, Bush I and Bush II, etc).

      To fix Social Security, remove the income limit (current $106,000 in income) and it's fixed. End of discussion.

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