When the trustees of the Social Security and Medicare programs release their annual reports, one of the first thing folks look for is whether the life of the trust funds that finance these retirement security programs have been extended or reduced.
Well, in Monday's release, the life of the Social Security trust fund was reduced by three years, from 2036 to 2033 (without changes to inflows or outflows, at that point Social Security would be able to pay about 75% of scheduled benefits). The date for the Medicare Hospital Insurance fund was unchanged.
My CBPP colleagues take you through the relevant conclusions here and here. The key takeaway from where I sit is that these remain critically important programs whose future can and should be ensured by policy actions designed to enable both programs to continue to provide retirement security for generations to come. Such actions should be careful not to hurt the security of middle and lower income retirees.
My point here, however, is a simple one regarding the exhaustion of the trust funds. The figures below show the exhaustion dates projected by the trustees over the last few decades. Note that they move around -- a lot. The Medicare hospital insurance trust fund has generally increased since the 1990s, as a function of legislative measures, like the Affordable Care Act, that extended its life (ACA added eight years to the HI fund).
The movements in the Social Security trust fund have been more of function of the economic and demographic assumptions (e.g., increased life expectancy); they range from over sixty years -- in 1985, they didn't expect exhaustion until 2050 -- to around 20 years today.
The figures are not intended to lessen the urgency of meeting the fiscal needs of these programs. But it is important to remember that these are forecasts based on a lot of moving parts, and the Great Recession is very much in play here.
As with so much else in our fiscal and economic landscape these days, the best thing to do in the near term is everything we can to get the recession behind us and get back on a stronger growth path.
This post originally appeared at Jared Bernstein's On The Economy blog.
Follow Jared Bernstein on Twitter: www.twitter.com/@econjared
Richard (RJ) Eskow: Social Security and Medicare: Six Common Myths, Debunked
So who's lying, Jared, you or your old boss?
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That is a Republican talking point, and it is FALSE.
Yes, Congress borrowed from the SS trust fund, but they did so by issuing US government bonds, which the trust fund now holds.
US government bonds are not "worthless IOUs;" rather, they are considered one of the safest investments in the world. That is why the program is fully solvent until 2033.
Your suggestion to lift the payroll tax cap certainly would help SS's long-term health. But there is no need to spread right-wing disinformation regarding the trust fund's current solvency.
(i) The cost of everything that can't be predicted
(ii) The number of long term care and the number of sick that need LTC
The last thing i would like to point out is that this was based on Projections that are impossible to push out 24 years.Contraction is a very likely outcome as pressure from outside sources increase,and energy becomes more of an issue in costs.
The politicos and their annointed scribes and aopolgists (like Bernstein) use the phony issue of trust fund exhaustion as fearmongering to get votes.
Because I think they're lying through their teeth!
Secondly, even if the report should be true, which I highly doubt, the fix for both are easy. Adjust the maximum salary upwards from $106,000 to $1 million...Social Security fixed. Put people back to work faster - and no the rich don't create jobs - so that more people are paying into the system regularly and eliminate Medicare Part D and Medicare is fixed.
These bills were signed by both Bush the minor and Obama in trade-offs for campaign funding, etc. We are blaming children, the disabled and the retired from unfairly gaming the system while the true miscreants are laughing at us from their gated villas.
Every penny paid into SS has been paid out or borrowed and spent. The so called trust fund is a bunch of treasury bonds. In order for SS to cash in the bonds, the govt must borrow the money. Last year, the govt. had to borrow over $40 billion to pay the difference between SS payroll taxes and SS benefits paid to retirees. With more baby boomers entering retirement every year, the SS deficit will only grow. This years payroll tax reduction will onmly exacerbate the problem.
PS, the average retiree will collect twice as much benefits as they paid into the system viar payroll taxes (including accumulated interest).
It is neither fair nor accurate to state that a retiree will collect twice as much as they paid into the system.
In addition, the baby boomer phenom was recognized long ago and the reason there is a large SS Trust Fund is because we were actually paying more than required into the fund to prepare for baby boomer retirement. It is the government's problem if they borrowed our Trust Fund and now want to renege on payback because money is tight. We just need to make sure that they are just as worried about what we will do as they are about what China will do if they fail to pay their debts. The solutions are really pretty simple and have been stated in several posts here. Raise the limit on collections from $106,000 annual salaries to $1 mil or remove the limit altogether. Also, quit taxing money manipulators and Wall Street gamblers less than real workers.
Somewhat unrelated but very telling is the fact that if the minimum wage had kept pace with the rise in executive salaries since 1990, the poorest workers in America would be making $23 an hour. Talk about a redistribution of wealth... Too bad it has all been upward to the already overpaid.
What I will comment on is the damage that the social security system has, through mutation over the years, come to do to America and Americans. This is a system that started out with the best intentions, to provide a minimal security to indigent elders. It's become a giant government entitlement.
So let's discuss.
The most important thing to give kids is a loving secure upbringing. Second most important is an introduction to the culture of success (normally equated to 'a good education'). The third most important thing is to give one's kids is a modest inheritance to get "over the hump".
Those who rely on Social Security leave nothing to their children, thereby perpetuating the inter-generational cycle of poverty. Simply "saving Social Security", without fixing it so that vastly more Americans can build personal wealth only perpetuates this cycle of government dependence/inter-generational poverty. We need more personal wealth and less dependence.
The politicians won't tell you this because they know you wouldn't vote for them if they did. The pundits won't tell you this because they know you'd stop clicking through their links if they did. So you heard it here.
The upbringing children get has zero to do with Social Security. The very best upbringing can't stop an accidental lifetime disability, turning a person into someone who is no longer physically able to work. Nor can it prevent the early death of a parent who's paid into the system for years and leaves minor children who deserve to share that parent's share of their Social Security benefit.
You give your children the best upbringing you can because it's the moral and ethical thing to do....not because of money!
"The upbringing children get has zero to do with Social Security" - - - I didn't say it did. I said that the 3rd greatest gift that a parent can give her grown child is a modest inheritance of personal wealth.
"You give your children the best upbringing you can because it's the moral and ethical thing to do....not because of money!" - - - Then don't complain about the tens of millions of others who see that in its proper place and proportion, money is important. It is important, isn't it? Otherwise, why are you arguing for SS to give you more of it? If money's not important, then it doesn't matter if we shut down SS altogether, right?