WASHINGTON -- The Concord Coalition said today that this year’s reports from the Social Security and Medicare trustees sound a blaring alarm that legislative actions must be taken soon to avoid sudden substantial benefit cuts by 2035 for Social Security and by 2028 for Medicare Part A.
“Social Security and Medicare are enormously important programs for millions of American families who rely on them to be there for current or future retirement income, disability benefits, and healthcare needs. It is stunning and deeply irresponsible that year after year lawmakers of both parties routinely ignore the trustees’ warnings that neither program is on solid financial ground,” said Robert L. Bixby, Concord’s executive director. Any ‘political leader’ worthy of that title, including those out on the 2022 campaign trail, should make it a priority to find solutions that are both fiscally and generationally responsible,” Bixby said.
As detailed in the reports, both programs contribute to steadily rising budget deficits while at the same time neither program can pay the full amount of promised benefits under current law. Ignoring the warnings in these reports will leave the public unprepared for changes that must inevitably be made to make these vital programs sustainable.
Bixby added: “The trustees’ warnings seem all the more alarming because the country is not in a position of current or projected fiscal strength. Delaying reforms would simply exaggerate generational inequities.”
To illustrate the magnitude of the challenge, the trustees estimate that one of three things must happen to keep the retirement program solvent over the next 75 years: (1) dedicated revenues would have to increase by an amount equal to an immediate and permanent payroll tax increase of 3.24 percentage points -- from 12.4 percent to 15.64 percent, an immediate 26 percent increase; (2) scheduled benefits would have to be reduced, for all current and future beneficiaries, by an amount equivalent to an immediate and permanent reduction of 20.3 percent, or (3) a combination of the two.
Delaying action until 2035, when the combined Social Security trust funds are projected to become insolvent, would increase the necessary payroll tax to 16.47 percent; require a 24.9 percent benefit cut, or some combination of the two.
It is also important to remember that Social Security and Medicare do not “pay for themselves.”
The trustees’ reports confirm that Social Security and Medicare Part A (Hospital Insurance) will experience growing cash deficits in the future as they pay out more than they receive from their dedicated resources.
General federal revenues also support Medicare Part B, which provides various medical services, and Part D, which helps pay for prescription drugs. By design, the premiums that older Americans pay for these parts of Medicare only cover about 25 percent of their costs.
According to supplemental data provided with the trustees’ report, the general revenue transfers to Social Security and Medicare totaled $554 billion in 2021 or 2.4 percent of GDP. This consisted of $126 billion for Social Security and $428 billion for Medicare. If full benefits were maintained in both programs, by 2064 these transfers would double to 4.8 percent of GDP.
The Concord Coalition also noted that for the seventh year in a row, the public trustee positions have been left vacant. This is a very serious omission.
The public trustees play a vital role in ensuring objective oversight of Social Security and Medicare finances. The two public trustees are the only trustees who are not members of the president’s administration, and by law one must be a member of the opposing party. Concord urges the president and Congress to agree on two credible candidates to fill these crucial positions in time for them to have a meaningful role in preparing the 2023 report.