By Adam Andrzejewski for RealClearInvestigations
Top line: According to OpenTheBooks’ analysis of the nation’s latest financial report, it will take another $175.3 trillion to keep Medicare and Social Security intact for when today’s children reach old age.
Main aspects: The Treasury Department projected spending over an “infinite horizon,” that is, over the lifetimes of everyone in the country today.
Current Medicare and Social Security participants are projected to reap $105.4 trillion more in benefits from the programs than those who contribute to them through payroll taxes.
Future participants, who are under 15 and still in the womb, will use $69.9 trillion more than they pay in taxes.
Overall, that’s an unfathomable $175.3 trillion gap that can only be filled with “an increase in borrowing, a tax increase, a reduction in program spending, or some combination,” according to the Treasury.
There’s no easy way to put that number into context. The national debt amounts to “only” 34 trillion dollars. Since the Constitution was written in 1787, the federal government has spent about $200 trillion in total, even after adjusting for inflation.
Medicare Part B, which covers doctor visits and medical equipment, represents the largest liability. It is projected to be underfunded by $99.5 trillion.
Social Security needs an extra $68.8 trillion to be solvent.
Background: Medicare and Social Security are supposed to finance themselves completely through payroll taxes, health care premiums, and benefit taxes, a process that worked well until the 1980s.
Former President Ronald Reagan, among others, warned of a looming funding crisis and encouraged Congress to pass the Social Security Reform Act of 1983.
But the system has remained largely intact since then.
Medicare spending was 2.9% of U.S. GDP in 2022, but the Congressional Budget Office projects it will reach 5.9% of GDP by 2052. Social Security spending is expected to increase from 4, 9% to 6.4%.
Medicare is expected to begin cutting benefits in seven years, but the long-term implications are much more serious. U.S. law requires the Treasury to borrow money if there isn’t enough to pay for Medicare and Social Security, which may soon be impossible without multiplying the federal debt.
Summary: There is no realistic path to generating the amount of money needed to avoid cutting Medicare and Social Security payments. Politicians have postponed this difficult dialogue for decades, but soon this will no longer be an option.
The #WasteOfTheDay is brought to you by the forensic reviewers at OpenTheBooks.com
Distributed with permission from RealClearWire.
