SS & Medicare Outlook Bleak : A Third Rail Problem

Social Security and Medicare - the third rails of politics. It will be easier to have it run out, causing chaos among the mandated individuals that is sure to occur, then to make hard decision that the politicians know they will be attacked for. And, when the system does fail, those same politicians that wanted to fix it will be attacked anyway for not coming up with a plan to solve this huge problem back when they had a chance.

Fixing a mandate this huge is a lose lose proposition. 

Social Security, Medicare Outlook: Better but Still Bleak
Source: Nick Timiraos, "Social Security, Medicare Outlook: Better but Still Bleak," The Wall Street Journal, July 22, 2015.

July 29, 2015

The long-term solvency of Medicare and Social Security has improved slightly, but the imminent depletion of a fund for disabled workers highlights the risk of delays in addressing rising costs of the government programs.

An annual report card Wednesday from the trustees of both programs showed:

• The long-term deficits associated with the two largest benefit programs would be slightly smaller than forecast last year.
• The Social Security disability-insurance program will exhaust its reserves late next year, which would trigger a 19 percent cut in benefit payments.
• Around 6 percent of workers who were eligible for disability insurance claimed those benefits in 2013, up from 4 percent in 2001.
• Social Security was designed as a pay-as-you-go program, but it has been paying out more in benefit dollars than it collects in tax revenue since 2010.
• Excluding interest, the program ran a deficit of $74 billion last year, versus a slightly larger $76 billion deficit in the prior year.

Treasury Secretary Jacob Lew said the shortfall should be addressed by Congress by reallocating the share of payroll taxes that fund the disability-insurance trust fund and the much larger retirement-benefit reserves. The reallocation would leave both funds depleted by 2034, one year later than estimated in last year's report.

Wednesday's report isn't likely to alter that dynamic, but it could shape policy debates in the 2016 presidential campaign. The next president could see domestic priorities crowded out by rising spending on the benefit programs. Medicare and Social Security accounted for 42 percent of federal spending last year, up from 36 percent in 2011.