Thomas Donlan of Barron’s crunches the numbers for Social Security and Medicare. They don’t look good.
This is a good time to publish reports on the performance and prospects of the federal government. Sending them out when much of the nation is at the seashore or the mountains is entirely natural if the goal is avoidance of responsibility.
The annual trustees’ report cards for Social Security and Medicare have been coming out later and later—not because the calculations are so hard to make, but because the bottom lines are so hard to accept. …
… Social Security’s retirement and disability programs have reserves, which the government calls trust funds, to back up their tax revenue; Medicare’s hospital insurance has a similar reserve fund. These were built up in the years when tax revenue exceeded the cost of benefits. Compound interest was also on the side of the beneficiaries, because the reserves were invested in Treasury bills, notes, and bonds, and the funds received interest from the Treasury.
Nowadays, however, there are 57 million Medicare beneficiaries and 61 million Social Security recipients, and both populations are growing rapidly. The cost of health care per Medicare beneficiary is growing even faster.
Tax revenues don’t cover the cost of benefits, and the trust funds are shrinking. The interest payments from the Treasury are also shrinking, because they are being used to provide an illusion of fiscal stability. …
… Unless Congress raises revenue for the programs, spending on Social Security and Medicare hospital insurance will be limited to the amount of taxes collected for them. On the current estimates, Medicare would reduce payments to providers by 12% in 2029 (affecting 80 million Americans), and Social Security would cut benefits across the board by 23% in 2034 (affecting 87 million Americans).
