Tuesday, May 12, 2009

Social Security and Medicare finances worsen

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." (DUH, no shit Sherlock!)

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. "When we can't afford the public health plan we have already, does it make sense to add more?"

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." (Someone actually sees the light!)

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. (Geez, that's only about 96% less than hoped for.)

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 that the Social Security annual surplus would be eliminated entirely in 2016, reflecting increased demands from the wave of 78 million baby boomers retiring.

That means Social Security will have to turn to its trust fund to make up the difference between Social Security taxes and the benefits being paid out beginning in 2016. The trustees projected the trust fund would be depleted in 2037, four years earlier than the 2041 date in last year's report.

At that point, the annual Social Security taxes collected would be enough to pay for three-fourths of current benefits through 2083. To tap the trust fund, the government would have to increase borrowing or raise taxes because Social Security bonds exist only as bookkeeping entries.

While the smaller surpluses that will begin this year will not have any impact on Social Security benefit payments, the government will need to borrow more at a time when the federal deficit is already exploding because of the recession and the billions of dollars being spent to prop up a shaky banking system.

Medicare's condition is more precarious, reflecting the pressures from soaring health care costs as well as the drop in tax collections.

The options available to deal with the Social Security shortfall include raising the payroll tax that funds Social Security, such as removing the cap on income subject to the tax, or cutting benefits in some fashion such as raising the retirement age.

The administration is pushing Congress to pass legislation this year to extend health care coverage to some 50 million uninsured Americans, preferring to tackle health care before Social Security. (Oh sure, that is bound to fix shit, NOT!)

The trustees report is likely to set off renewed debate over Social Security and Medicare. Critics have charged that the Obama administration has failed to tackle the most serious problems in the budget -- soaring entitlement spending.

The administration on Monday revised its federal deficit forecasts upward to project an imbalance this year of $1.84 trillion, four times last year's record, and said the deficits will remain above $500 billion every year over the next decade.

This story is important enough to warrant posting the entire thing, so I did just that. Here's the link in case anyone wants to find it to feel confidant that I didn't just make it up. Believe me, my mind in not that bizarre.

Just when in Hell are enough people going to wake up and do something constructive for a change? When are we going to get rid of the bozos that are doing this to our us, AND OUR GRANDCHILDREN?


Anonymous said...

"When we can't afford the public health plan we have already, does it make sense to add more?"Of course it does ... if your plan is to destroy American capitalism and woo voters whose only claim to intelligence is the American educational system.

You'll recall my article on health care on 7 May, where statistically, very few Americans are without health care, and many of those who are chose not to enroll in a program. But also note that the program is being pitched to people who think they are entitled to have babies out of wedlock at the taxpayer's expense.

Forest Gump's mom was right; stupid is what stupid does.

Anonymous said...

Common sense flew the coop years ago. The new common sense is that the more you spend, the wealthier you are. The more in debt you are, the more stable you are. Sounds like the words of Dave Ramsey on LSD, and yet it is what our President actually believes.

a red voice said...

sadly this will be the state of everything as the government takes control of more & more.... wasteful & reckless spending. I totally agree: "When we can't afford the public health plan we have already, does it make sense to add more?" NO!!!!!!!!!!!!!!!!!!!!!

shoprat said...

You almost wonder if he is closet conservative who is pushing this country until we push back and drive the left out of power forever. It almost seems that way.

Angie Lee said...

They don't need to give a shit about Medicare - once they ram Universal Healthcare up our collective rectal orifice, there will no longer be a NEED for Medicare, as everyone will be entitled to the same coverage across the nation under the single-payer system.

They just neglected to mention the fact that once you're old and actually having to consume healthcare dollars, you won't be eligible because you're just a burden on the system.

However, none of that will stop them from continuing to collect the "premiums" from our paychecks and from program recipients.

Anonymous said...

When are people going to wake up? In all honesty Joe, i don't think a lot of people even know how bad things are. The media doesn't tell them and to find out they have to tear themselves away from tv entertainment and all that and find out themselves.

And to top it all off the oppositions in our respective countries just aren't connecting with the middle classes. I fear things will get worse before they get better.

Being Right said...

Great blog my good man, I'll be coming back again and often.

Z said...

I give up..WHEN? I don't see it in the near future, Joe.

But, for us? FINALLY...I can be glad Medicare turned Mr. Z down...he doesn't have enough hours worked in and paid for by an American company. I think it's a good idea we kept his private insurance...though it's so expensive you would NOT believe it..even with a dreadfully high deductible.

Good post.

WomanHonorThyself said...

Our nation cannot afford to continue this reckless borrowing and spending spree." (Someone actually sees the light!)
..sorry ..dont hold yer breath hun!

Always On Watch said...

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.You'd be surprised at how many usually-knowledgeable people don't know that.

Of course, on top of Social Security retirement being in deep trouble, the 401k's and similar programs are in the dumper too.

Will Americans be working until they drop in the harness?

Angie Lee said...

"In deep trouble" is still putting it mildly, considering unfunded liabilities of Medicare and Social Security are somewhere in the vicinity of $99 TRILLION - hidden in plain sight since the federal government does not need to list those debts on the balance sheet but still money that must be paid.

That would be like my trying to say my personal unsecured credit card debt of 'x' thousand dollars doesn't REALLY need to be counted in my debt ratio, because although nothing is backing the debt, I said I would pay it back - you have my word and the full faith and credit of my past history to back it up - so give me another loan, already! Who cares that the economy is in recession and I will probably lose my job and be unable to pay back not only those credit cards but my new loan, too!

Brooke said...

Just stick the head in the sand and toss the wallet at it.

Politics at it's finest.

Rick said...

Oppose slavery? Don't own one...but ..support the right to choose..

Don't believe in abortions..don't have one...but support the right to choose..

Those who believe that life begins at conception can not be in favor of the right to choose...But don't knock it until youve tried it..or compromise on that issue.

Bloviating Zeppelin said...

AND oddly enough, when Mr George Bush decided to address the social security problem a few years ago, he was resoundingly SHOT DOWN because the DEMORATS didn't care to address the issue.

NO ONE cared to address the issue.

Kinda maybe sorta wish we had THEN?


Average American said...

Wow, it's been over a week since I had enough time to do some blogging. Thank you all for commenting and for not giving up on me. Hopefully, my busiest times are over, at least for a while.