Social Security and Medicare Funds At Risk Even Before Coronavirus

[appalachiablue]

Source: Associated Press

WASHINGTON (AP) -- The financial condition of the government's two biggest benefit programs remains shaky, with Medicare expected to become insolvent in just six years, while Social Security will be unable to pay full benefits starting in 2035, the government said Wednesday.

And that's before factoring what officials acknowledge will be a substantial hit to both programs from the coronavirus pandemic, which has shut down large parts of the U.S. economy and put millions of people out of work.

The depletion dates, which remained unchanged from last year's estimates, were revealed Wednesday with release of the annual trustees reports of both programs. When Social Security's reserves are exhausted in 2035, the program will only be able to pay 79% of benefits at that time.

Even if employment rebounds by the end of this year and payroll taxes return to near-normal levels, the shock from the pandemic shutdown could accelerate the depletion of the Social Security trust fund by about six months, officials told reporters...- More.


Read more: https://apnews.com/88109eff2df4c11c7d1d2937ca0134cb

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If a recession extends into 2021, a depletion would come a full year earlier. And the impact may be worse for the Medicare program, which in this report is estimated to deplete its reserves in 2026.

Economists project the expected recession will be the deepest since the 1930s, and it will see fewer people paying into Social Security and Medicare. Adding to the problem, the pandemic will impose heavier caseloads on the health program for those 65 and older.

Experts state that next year's report will be much more important because it will take into account the impact of pandemic.

So far more than 20 million workers have been laid off and they and their employers are no longer sending in payroll taxes to support Social Security retirement benefits and Medicare's giant trust fund for inpatient care...
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NOTE: HELPFUL INFO, socialsecurityworks.org
https://socialsecurityworks.org/

[cilla4progress]

1. Wouldn't M4A infuse

a bunch of $$$?

[iluvtennis]

2. Wow. unbelievble. nt

[Zoonart]

3. Cut the crap. Raise the cap.

Fixed.

[onecaliberal]

4. That.

[rzemanfl]

5. +1. n/t

[Ferrets are Cool]

7. This

[Bengus81]

13. The cut off should have been raised to the $10M a decade ago

Why the HELL do these rich fucks have their payments to SS stop about a quarter of the way through the year (or less) when those under $137,700 just pay and pay and pay??

Some rich ass or CEO making as little as 7.2M per year has SS taken out of their salary for the first week of the year and then it cuts off.

[cstanleytech]

6. So no money for those programs but assloads for overspending on our military which is insane.

[regnaD kciN]

10. And for bailout funds for "small businesses"...

...like Walmart, Ruth's Chris, etc., etc.

[doc03]

8. They pick $3 or $4 trillion out of thin air to bail out every damn industry. But when it

comes to SS we are broke. What about all the money they are saving killing off seniors with COVID-19?

[seta1950]

9. How is this possible

All of us who are working keep paying into these programs and yet all we hear is they’re failing , something really fishy.
That’s why they didn’t want Al Gore for President he was going to put social security in a ‘ lockbox’ not good for republicans.

[progree]

11. This has been a known problem for many decades - that the retired population keeps growing

while the working population (who are paying into Social Security through their payroll taxes) is stagnant. There has been a long decline in the worker-to-retiree ratio, and this decline will continue for a number of years.

Simply put, our 12.4% of payroll that we and our employers in combination pay into Social Security (and taxes paid on SS benefits) is not enough with today's demographics to pay all SS benefits. And even less so in the future.

For decades before 2010, what we and our employers paid in (and taxes paid on SS benefits) was more than enough to pay current SS benefits, so the surplus revenue that SS got was loaned to the federal government which issued bonds to the Social Security Trust Fund (SSTF).

Beginning in 2010, it reached the point that what was being paid in through payroll taxes etc. was not sufficient to meet SS benefits, but the interest earned by the securities in the SSTF was more than enough to make up the difference, and thus the SSTF continued to grow. (As of year end 2019, the SSTF was $2.9 Trillion)

Beginning in 2021 (next year!), according to the just-released 2020 Social Security Trustees Report,
https://www.ssa.gov/oact/TRSUM/index.html

even including the interest income, the income is not enough to pay current benefits. Therefore, some of the securities in the SSTF will have to be redeemed in order to fully pay promised benefits. (When this happens, the Treasury's general fund gives money to SS in exchange for the same amount of SSTF securities)

By 2035 (just 15 years from now), it is projected that the SSTF will be depleted.

For decades, under both Democratic and Republican administrations, the SS Trustees have been projecting this depletion to occur in or around 2035 plus or minus a few years. So this isn't just some RepubliCON scare-mongering.

So what happens when the SSTF runs out?

By current law, benefits have to be cut to the level that is matched by SS revenue from the payroll taxes (and taxation of SS benefits). This is enough to fund only about 79% of promised SS benefits ...

"After the depletion of reserves, continuing tax income would be sufficient to pay 79 percent of scheduled benefits in 2035, and 73 percent by 2094."

CAUTION:

"The projections and analysis in these reports do not reflect the potential effects of the COVID-19 pandemic on the Social Security and Medicare programs. Given the uncertainty associated with these impacts, the Trustees believe that it is not possible to adjust their estimates accurately at this time."

[melm00se]

14. As has been pointed out

above, this is a known issue but it doesn't take a statistical genius to figure it out.

Social Security is "pay as you go" program which works when you have up and to the right population growth and a population that is uniform in distribution. Unfortunately with the end of WWII, the US experienced the well known "baby boom" which jacked up the US population born between 1946 and 1964 which skewed the distribution curve well outside the "norm".

It was inevitable that when the baby boomer generation hit retirement age, it was highly likely that the "pay as you go" model of Social Security was going to take a hit. There really was no way for the US population to match or exceed the population boost (as a percentage of the total population) that accompanied the boomers.

Government is no different than individual people: they-do-not-like-change. Couple change averse with people who would not see the why something is being done (ideologues are like that regardless of where they are on the political spectrum) and they begin to beat the "anti" drum against the needed winds of change.

I have seen plenty of proposals on how to fix this problem, most notably raising the cap on FICA eligible incomes, but none of them face reality.

If the cap is raised, that would equal a 6% tax increase on individuals and a portion of the 6% employers component would hit all businesses. In and of itself, that is something that most businesses could weather. Unfortunately, there are similar calls to raise income tax rates. Which, in and of themselves, could also be weathered. It is when you begin to couple all the suggested tax hikes together that you put enormous pressure on the economy.

While yes, there could be coincidental cuts in government spending, it would be key that these cuts be in such a way not to (or at the very least minimize) impact the government's ability to discharge the obligations that are absolutely necessary.

The way the US political system is set up, no one party will dominate sufficiently for a long enough period to pass both the sets of actions and make them stick past the next election. The midterm elections (19 of 22 times since 1934) have not been kind to the President's party so it is possible that the tax hikes and spending cuts could be overturned within one of two Congresses.

[DeminPennswoods]

15. Thank you for pointing out SS/Medicare are pay-as-you-go

programs paying benefits out of OASDI taxes paid by the currently employed.

[Karma13612]

12. Just what we need.

Another avoidable crisis in the wings.

Yup, raise the cap FFS.

I’ve been saying this for YEARS!

Just do it already.

We need the trifecta (WH, House and Senate) come January.
Lets get some $hit done already!

[Bayard]

16. I keep saying,

Take back the tax cuts tRump bequeathed on the rich and corporations, and actually raise their taxes a little. Historically, they paid much higher taxes before Reagan. And no one making a million bucks a year needs to be drawing SS for gawdsakes! Its not like they are relying on it in their golden age.

I definitely don't like the idea of raising the retirement age. We already work our asses off all our lives.

[New Breed Leader]

17. BULLSHIT.