WASHINGTON -- While the nation’s attention is justifiably focused on multiple other crises, today’s publication of the Social Security and Medicare trustees reports reminds us of another call to action: averting the financial crisis in our nation’s largest entitlement programs.
The trustees’ projections of trust fund insolvency dates often receive considerable attention – and the combined Social Security retirement and disability trust funds are projected to exhaust their balances one year earlier than in last year’s report – but more ominous is that for the first time since 1982, total costs of the Social Security program will exceed total revenue (including interest) this year and in every year thereafter. The Social Security Administration must now liquidate bonds held by the trust funds every year to pay benefits. The countdown clock to trust fund exhaustion, and the subsequent benefit cuts it imposes, is now ticking.
“Sudden and substantial benefit cuts await Medicare and Social Security beneficiaries in less than 15 years – well within the lifetimes of many current recipients – as long as lawmakers continue to ignore the warning signs in these reports. Solutions must be found that are fiscally and generationally responsible,” said Robert L. Bixby, Concord’s executive director.
Moreover, redeeming the trust fund bonds will siphon increasingly larger shares of general revenue from the Treasury, driving up budget deficits, the national debt, and net interest payments. According to a recent analysis by Steve Robinson, Concord’s chief economist, by the end of the 75-year projection period, the additional publicly-held debt issued to finance redemption of the Social Security trust funds through the 2034 exhaustion date, plus the corresponding interest payments on that debt, would exceed 20 percent of GDP.
“The timing of these reports is somewhat serendipitous,” said Bixby. “Congress is on the verge of spending $3.5 trillion on the next installment of the president’s agenda. These actuarial reports bring into sharp focus the need to shore up existing entitlements before creating new ones.”