by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The trustees of the Social Security and Medicare trust funds reported last week that their funds are going to hell in a handcart, but not right away. That’s what they have always said, even while the trust-fund programs have grown to represent an unfunded liability of the federal government over the next 75 years of $11.7 trillion, up $700 billion from the last annual report.
Publication of the trustees’ reports is an annual event that never gets the attention it deserves—especially in a presidential election year, and more especially in the week of the market earthquake caused by the British vote to leave the European Union.
Here are highlights of the 2016 report:
The trust fund for the big Social Security retirement program is projected to run dry in 2034. The program paid $706.8 billion in benefits to 48.1 million people in 2014.
The tax revenue that supports Social Security retirement income hasn’t fully covered benefits since 2010, so the program is already on the way to being pay as you go. Benefits will be reduced by about 25% in 2034 unless Congress changes the program.
Under pressure from the left wing of his party, President Barack Obama recently proposed a change for the worse: making the benefits more generous while uncapping the 12.4% Social Security tax so that it applies to workers’ wages and salaries exceeding $118,500 a year.
The Social Security Disability Insurance trust fund, the smallest and most troubled of the three, could have run dry this year. But Congress gave it seven more years of life with an accounting gimmick, transferring $117 billion from the less-unhealthy retirement program to the critically-ill disability program. It had 10.9 million beneficiaries in 2014 who received $141.7 billion.
The Medicare Hospital Insurance trust fund (Part A) is projected for depletion in 2028, two years earlier than previously estimated. By then, the payroll tax will cover only 86% of the cost. This Medicare insurance covered 53.8 million people in 2014 and paid benefits of $264.9 billion.