Tuesday, April 23rd 2019, 4:21 am
President Trump has declared benefit cuts to the nation's signature retirement programs off limits and many Democratic presidential candidates are calling for expanding Medicare benefits — even proposing "Medicare for All" — rather than addressing the program's worsening finances.
Many on both sides actually agree that it would be better for Washington to act sooner rather than later to shore up the programs instead of waiting until they're on the brink of insolvency. The latest report from the government's overseers of Medicare and Social Security show the financial condition of the bedrock retirement programs for middle- and working-class Americans remains shaky.
Monday's report paints a sobering picture of the programs, though it's relatively unchanged from last year's update. Social Security would become insolvent in 2035, one year later than previously estimated, with only enough money cover 80 percent of its obligations. Medicare is pointed toward insolvency even sooner, by 2026.
But potential cuts such as curbing inflationary increases for Social Security, hiking payroll taxes, or raising the Medicare retirement age from the current 65 are so politically freighted and toxic that Washington's power players are mostly ignoring the problem.
The report by three Cabinet heads and Social Security's acting commissioner, urges lawmakers to "take action sooner rather than later to address these shortfalls, so that a broader range of solutions can be considered and more time will be available to phase in changes while giving the public adequate time to prepare."
If Congress doesn't act, both programs would eventually be unable to cover the full cost of promised benefits. With Social Security that could mean automatic benefit cuts for most retirees, many of whom depend on the program to cover basic living costs.
For Medicare, it could mean that hospitals, nursing homes, and other medical providers would be paid only part of their agreed-upon fees.
In a glimmer of good news, Social Security's disability program is now estimated to remain solvent for an additional 20 years, through 2052. Overall, however, Social Security would run out of reserves by 2035, one year later than projected in last year's report.
"We remain committed to further bolstering the programs' finances, which will benefit from the long-term growth we will see as a result of the Administration's economic policies," said Treasury Secretary Steven Mnuchin.
As an indication of Medicare's woes, it would take a payroll tax increase of 0.91 percentage points to fully address its shortfall or a 19% cut in spending. Medicare's problems are considered more difficult to solve, as health care costs regularly outpace inflation and economic growth.
Social Security is the government's largest program, costing $853 billion last year, with another $147 billion for disability benefits. Medicare's hospital, outpatient care, and prescription drug benefits totaled about $740 billion.
Taken together, the two programs combined for 45% of the federal budget, excluding interest payments on the national debt.
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