The trustees for the government's two biggest benefit programs said Monday that the trust fund for Social Security will be depleted in 2040, a year earlier than expected, while Medicare will exhaust its trust fund just 12 years from now.
The annual report showed deterioration in the financial condition of both programs although the problems in Medicare were depicted as far more serious because of the skyrocketing costs for health care.
A year ago, the depletion of the Social Security trust fund had been projected to occur in 2041, one year later than the current estimate, and the Medicare hospital insurance fund had been forecast to last until 2020, two years longer than the current estimate.
The trustees, who include the head of the Social Security Administration and three members of President Bush's Cabinet, painted a sober assessment of the health of the two programs in advance of the looming retirements of 78 million baby boomers.
They stated that the projected long-term growth rates for both Social Security and Medicare are not "sustainable under current financing arrangements."
The trust funds contain the equivalent of government IOUs. To raise the actual cash to meet obligations, the government must borrow more money from the public by issuing marketable Treasury securities, raise taxes or cut spending in other programs.
Bush tried last year to overhaul Social Security by introducing private investment accounts for younger workers, but the idea went nowhere in Congress. Democrats attacked the Bush program as a hidden effort to cut future benefits.
In this year's State of the Union address, Bush asked Congress to create a bipartisan commission to study entitlement reform. But even this modest proposal has not generated much interest, in part because lawmakers do not want to address entitlement reforms in a congressional election year.
Treasury Secretary John Snow, the chairman of the trustees group, said the new report depicted "a looming fiscal crisis as the baby boom generation moves into retirement" and he urged Congress to move forward.
"The serious concerns raised by the trustees' reports demand the attention of America's policy-makers and the public," Snow said.
But Democrats charged that the administration was using the reports to try to create an air of crisis to make radical changes to the two benefit programs.
"There is no crisis," said Rep. Pete Stark, D-Calif. "There remains plenty of time to mend rather than end Medicare."
The one-year faster depletion of trust funds in the case of Social Security occurred because the government estimated a slightly lower average of 2.9 percent rather than 3 percent for the inflation-adjusted return for the fund's government bonds. For Medicare, the faster exhaustion of the trust fund occurred because of rising prices for hospital care and greater utilization by sick people of the program.