Social Security and Medicare are fading even faster under the weight of the recession, heading for insolvency years sooner than previously expected, the government warned Tuesday.
WASHINGTON — Social Security and Medicare are fading even faster under the weight of the recession, heading for insolvency years sooner than previously expected, the government warned Tuesday.
Social Security will start paying out more in benefits than it collects in taxes in 2016, a year sooner than projected last year, and the giant trust fund will be depleted by 2037, four years sooner, trustees reported.
Medicare is in even worse shape. The trustees said the program for hospital expenses will pay out more in benefits than it collects this year, just as it did for the first time in 2008. The trustees project that the Medicare fund will be depleted by 2017, two years earlier than the date projected in last year's report.
The trust funds — which exist in paper form in a filing cabinet in Parkersburg, W.Va. — are bonds that are backed by the government's "full faith and credit" but not by any actual assets. That money has been spent over the years to fund other parts of government. To redeem the trust fund bonds, the government would have to borrow in public debt markets or raise taxes. Treasury Secretary Timothy Geithner, the head of the trustees group, said the new reports were a reminder that "the longer we wait to address the long-term solvency of Medicare and Social Security, the sooner those challenges will be upon us and the harder the options will be."
Geithner said that President Barack Obama was committed to working with Congress to find ways to control runaway growth in both public and private health-care expenditures, noting the promise Monday by major health-care providers to trim costs by $2 trillion over the next decade.
However, Republicans pointed to the newly dire assessments as evidence the Obama administration has failed to come forward with actual entitlement reform to close the funding gaps.
"Instead of getting existing public programs in order right now, some are saying we should create a new government-run health-insurance plan," Sen. Chuck Grassley, the top Republican on the Finance Committee, said in a reference to the administration's health-care proposals.
House Republican leader John Boehner said the trustees report "confirms what we already knew: Our nation cannot afford to continue this reckless borrowing and spending spree."
The findings in the trustees report, the annual checkup given the two benefit programs, did not come as a surprise. Private economists had been predicting that the dates the programs would begin to pay out more than they take in and the dates the trust funds would be insolvent would occur sooner given the economic recession.
The deep recession, the worst the country has endured in decades, has resulted in a loss of 5.7 million jobs since it began in December 2007. The unemployment rate hit a 25-year high of 8.9 percent in April.
Fewer people working means less being paid into the trust funds for Social Security and Medicare. The Congressional Budget Office recently projected that Social Security will collect just $3 billion more in 2010 than it will pay out in benefits. A year ago, the CBO had projected that Social Security would have a much higher $86 billion cash surplus for the 2010 budget year, which begins Oct. 1.
The trustees report projected that Social Security's annual surpluses would "fall sharply this year," then remain at a reduced level in 2010 and be lower in the following years than last year's projections. The report said the Social Security annual surplus would be eliminated entirely in 2016, reflecting increased demands from the wave of 78 million baby boomers retiring.