High energy prices and an economy that has been slow to rebound are worsening Social Security’s finances, shortening the life of the trust funds that support program by three years, the government said Monday.
Those trust funds will now run dry in 2033, according to a report issued by the trustees that oversee the massive retirement and disability program.
Medicare’s hospital insurance fund is projected to run out of money in 2024, which is unchanged from last year. The trustees, however, said Medicare spending continues to rise.
Congress enacted a 2 percent cut in Medicare last year, which is the main reason the trust fund exhaustion date did not advance.
If the Social Security and Medicare funds ever become exhausted, the nation’s two biggest benefit programs would collect only enough money in payroll taxes to pay partial benefits.
The trustees said in their annual report that Congress should address the programs as soon as possible, but no action is likely before the November election.
“Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare,” the trustees wrote. “If they take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare.”
Social Security’s finances worsened in part because high energy prices suppressed wages, a trend the trustees see as continuing. The trustees said they expect workers to work fewer hours than previously projected, even after the economy recovers.
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2 Responses
Actually the trust fund hasn’t existed for a long time. The money was “borrowed” to pay for government spending.
The system has been a self-inflicted “ponzi” schemes since the benefit level was always set too high relative to the taxes charged (or alternatively, the taxes were always too low relatives to the benefit level).
For the numbers ever to have worked, there would have to be a perpetually booming economy, high immigration and a high birth rate.
Exactly. The “trust fund” has only ever existed on paper. There has never been any actual money in it, just IOUs from the government to itself, which can only be “repaid” from the same place the government gets its money in the first place — the taxpayer. The distinction between the “Income Tax” and the “Social Security Tax” is artificial, and always has been; the reality is that there are simply two taxes on income, both of which go to the government treasury to pay its ongoing expenses, and one of those expenses is Social Security. So it makes no difference how much the “Social Security Tax” brings in; there’s no reason why payments shouldn’t come from the “Income Tax” or from any other tax the government chooses to impose. The real problem is that there is a limit to how much tax the government can extract from the people, under whatever names it uses, before the people refuse to pay. When the cost of Social Security goes up to 1/4 or 1/3 of a normal person’s income, people will simply say “no, some old person I don’t know and who has never done anything for me is not entitled to 1/4 of my income”, and they will elect a Congress that will cut or abolish Social Security.