[nabs-l] Social Security and Medicare finances worsen

[Jim Reed]

		Social Security and Medicare finances worsen
		
		Social Security and Medicare both facing depletion of trust funds sooner because of recession 	Martin Crutsinger, AP Economics WriterOn Tuesday May 12, 2009, 6:07 pm EDT
	


							
	                    
						
                        			
	
WASHINGTON (AP) -- 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."
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."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.
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.
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.