Social Security and Medicare Funds Face Insolvency
Report Finds Last week, an annual government report on the status of Medicare and Social Security, painted a dire portrait of their solvency that will saddle the United States with more debt at a time when the economy is starting to cool and taxes have just been cut.
According to the report, the cost of Social Security, the federal retirement program, will exceed its income in 2020 for the first time since 1982. The program’s reserve fund is projected to be depleted in 16 years, at which time recipients will get smaller payments than they are scheduled to receive if Congress does not act.
Meanwhile, Medicare’s hospital insurance fund is expected to be depleted in 2026 — the same date that was projected a year ago. At that point, doctors, hospitals and nursing homes would not receive their full compensation from the program and patients could face more of the financial burden. Although the report presented a grim long-term outlook, it was something of a bright spot that Social Security’s reserves are not depleting more quickly. The program’s disability fund is now not expected to run out until 2052 — 20 years later than what was projected last year.
Lawmakers have been struggling to come to grips with a solution for the country’s eroding entitlement programs, which have for years been at the center of a political tug of war between Republicans and Democrats. President Trump was initially resistant to calling for cuts to the programs, but his budget proposal last month did just that. The request, which is being ignored by Congress, proposed shaving $818 billion from projected spending on Medicare over 10 years. It also called for $26 billion less on Social Security programs, including a $10 billion cut to Social Security Disability Insurance, which provides benefits to disabled workers.
Fiscal watchdog groups said that the new figures underscored the need for changes to the programs. “That fact that we now can’t guarantee full benefits to current retirees is completely unacceptable, and it should be cause enough for every policymaker to rally around solutions to restore solvency to those programs,” said Maya MacGuineas, the president of the Committee for a Responsible Federal Budget. “Certainly we should be focused on saving Social Security and Medicare before we start promising to expand these programs.”
She added that “now isn’t the time for partisan bickering — we need solutions.”
That appears unlikely in the near term. The weight of Social Security and Medicare on the economy is projected only to grow. Next year, the combined cost of the programs is projected to be 8.7 percent of the gross domestic product. By 2035, that will jump to 11.6 percent.