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Archive for Wednesday, May 13, 2009

Social Security, Medicare rapidly being depleted

Health and Human Services Secretary Kathleen Sebelius is shown with Treasury Secretary Timothy Geithner.

Health and Human Services Secretary Kathleen Sebelius is shown with Treasury Secretary Timothy Geithner.

May 13, 2009

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— 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.

Medicare already is paying out more money than it receives, something that happened for the first time last year. And Social Security will be by 2016, a year sooner than had been projected, the trustees’ annual report said.

Unless changes in Social Security are enacted, the retirement fund will be depleted in 2037, four years sooner than projected last year. The Medicare trust fund is in even worse shape. It is projected to become insolvent in 2017, two years earlier than expected.

More immediately, the trustees do not expect Social Security recipients to get cost-of-living increases in 2010 or 2011, something that hasn’t happened since automatic adjustments were adopted in 1975. The Social Security Administration will set next year’s cost-of-living adjustment in October, based on inflation over the previous year.

“We should neither be casual nor hysterical about the revised insolvency dates,” Social Security Commissioner Michael Astrue said. “The Social Security system will weather this recession. However, the sooner we get on with the task of reforming the system, the easier it will be to make the tough choices.”

The recession is hurting both funds, which are financed by payroll taxes. The U.S. has lost 5.7 million jobs since the recession began, meaning fewer payroll taxes are flowing into the funds. At the same time, aging baby boomers and rising health care costs are adding to expenditures.

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 reducing health care costs is the key to saving Medicare.

“The most effective entitlement reform measure will be a major health reform that helps bring down the growth rate of national health care spending,” Geithner said.

President Barack Obama and Congress have been working to overhaul the health care system with the goal of increasing coverage and lowering costs. But there is no consensus on how to pay for it.

“This report underscores the urgency of action on comprehensive health care reform this year,” said Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee. “As costs continue to rise, the Medicare program so important to so many American families is put in jeopardy.”

Republicans agreed that health care reform is urgent, but they warned against creating another government-run system.

“When we can’t afford the public health plan we have already, does it make sense to add more?” asked Sen. Chuck Grassley of Iowa, the top Republican on the Finance Committee.

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.”

Geithner said the Obama administration plans to tackle Social Security once it health care is addressed. The options for fixing Social Security are simpler than for Medicare, though just as politically daunting: either raise revenues or cut benefits.

Workers fund Social Security by a paying 6.2 percent payroll tax on the first $106,800 of their earned income. Employers match the payment. Increasing revenues could be accomplished by increasing the tax rate or increasing the amount of earnings that are taxed.

Workers can currently retire with full benefits at age 66. The retirement age is scheduled to gradually rise to 67 for those born in 1960 or later. One option for cutting benefits would be to raise the retirement age even further.

“Social Security is really a math problem,” said David Certner, director of legislative policy for the AARP. “Can you make sure that the money coming in is the same as the money going out?”

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. After the fund is depleted in 2037, annual Social Security taxes collected would be enough to pay for three-fourths of current benefits through 2083.

Comments

ChrisNyberg 5 years, 7 months ago

I can't believe team Obama have not figured out to just print more money.

Chris Ogle 5 years, 7 months ago

Social Security, Medicare rapidly being depleted

Kathy is really on top of this.... just like the Kansas mess.

Music_Girl 5 years, 7 months ago

Lesson to be learned: don't depend on the government for your retirement! Start saving when you are younger (20's) and you will have enough to retire on your own without the "help" of the government and all their red tape.

Music_Girl 5 years, 7 months ago

Liberty_One, It's a better plan than sitting around and hoping the government will have the money to pay you.

feeble 5 years, 7 months ago

SS isn't close to being out of money, yet. Insolvency date on SS is 2037. SS can be fixed quite easily, there are a number of plans on the table that cut benefits, propose very modest changes to payroll taxes, or some combination of the two. The problem with SS isn't finding the money, it's finding the political will.

Medicare, however, is looking pretty boned.

average 5 years, 7 months ago

Liberty_One is very possibly right. And, if neither social security or savings is going to get you a retirement, your best bet is to live your 30s and 40s like you expect to die at 65. Even if you are barely surviving and eating cat food at 70, at least you won't have to feel bitter that you spent your salad days working 60-hour-weeks and saving 30% of your income.

jmadison 5 years, 7 months ago

Obama's fix = ration care of those in Medicare, higher death rates among Medicare users(most of whom are Social Security recipients) = pragmatic solution. Send Joe Biden out to pitch this "solution" as patriotic.

MyName 5 years, 7 months ago

Okay, this is really dumb. We've known about the Social Security issue for 10+ years and people are like "why hasn't Obama fix't it yet?". Why didn't Bush, or Clinton, or Bush II fix it??

The reason why no one has fixed it is because it's not politically easy to do so. No one wants to be blamed for raising the payroll taxes or cutting the benefits which are the only real fix (not the stock market, that's for darn sure). So they're going to put it off until the last minute.

As far as Medicare goes, the Republicans went farther than just doing nothing. They actually made it worse by wedging in the Prescription Drug bill during the first Bush term. But they seem to have conveniently forgot that. The first step to fixing Medicare (and probably the second and third steps) is to get the costs under control.

And, as a side note, it's funny how all the private insurance lobby likes to vilify public health care, but I seriously doubt they would be willing to take the people who benefit from Medicare into their plans if they have a choice. It would cut too much into their bottom line.

average 5 years, 7 months ago

Of course Medicare is going to be costly. Take care of the most expensive people (the elderly) so private corps can make profits on covering the less-expensive cases.

Imagine how expensive private insurance would be if they were forced to cover 80-year-olds. Or how quickly they'd dump them off their rolls if they weren't forced to. Medicare has been a relief valve gift to the insurance companies. Without it, single-payer would have won the political debates decades ago.

Just like if there were public schools taking all the special-needs kids and private schools could pick-and-choose among the gifted. Of course those private schools would cost less and perform better.

Thinking_Out_Loud 5 years, 7 months ago

MyName wrote "The reason why no one has fixed it is because it's not politically easy to do so. No one wants to be blamed for raising the payroll taxes or cutting the benefits...." Hence, the expression, "the third rail."

"...politicians got the message loud and clear that Social Security was sacred to the American people and tinkering with it—no matter how noble the intentions—was tantamount to political suicide." http://seniorliving.about.com/od/socialsecurity101/a/socialsecurity.htm

OzChicklet 5 years, 7 months ago

MyName (Anonymous) says…

Okay, this is really dumb. We've known about the Social Security issue for 10+ years and people are like “why hasn't Obama fix't it yet?”. Why didn't Bush, or Clinton, or Bush II fix it??


Actually, SS has had issues for more than 10 years. But your point is well taken. I have never understood why the ceiling on payroll taxes is so low. So the poorer folks (earnings < $106,800 pay 6.2% of their earned income. Employers/self-employers match the payment) are expected to cover fulfilling the SS needs of the country, while folks that make an abundance more don't pay more, but can (and do) still collect.

I say lower the % and take the cap off. All you young people, start having kids! We need more young people to pay into the system!

jaywalker 5 years, 7 months ago

“SS isn't close to being out of money, yet. Insolvency date on SS is 2037. SS can be fixed quite easily,”

Really? I thought I just heard the date had recently been adjusted from 2017 to 2016.

Richard Heckler 5 years, 7 months ago

The contributions to Social Security will become less than the benefits paid out in 2018, based on the trustees' overly pessimistic assumptions. (See "Social Security Isn't Broken" and "The SSA's Cracked Crystal Ball," D&S November/December 2004, at www.dollarsandsense.org>.)>

But that doesn't mean that the Social Security Administration will need to start selling bonds at that point. The interest income from the existing bonds will be sufficient to make up the difference until 2028. If the trustees' pessimistic assumptions are true, they will need to start selling bonds in 2028 and the trust fund will be reduced to zero in 2042. At that point, as I mentioned above, the Social Security system would simply revert back to pure pay-as-you-go, operating just as it did successfully from 1936 to 1983.

http://www.dollarsandsense.org/archives/2005/0505orr.html

OzChicklet 5 years, 7 months ago

Liberty_One (Anonymous) says…

OzChicklet (Anonymous) says…

“I say lower the % and take the cap off”

Yes, completely remove any and all notions that it is a retirement plan, and make it completely clear that the purpose is to plunder the populaiton.

It's not plundering the population. Maybe you never had a grandmother who raised 3 children during the depression (who all died early on and could not support her) and she died in a hell hole of a retirement home a week after I found her. You probably think SS is just another hand out to folks that don't deserve it after working their a$$ off their whole life and are lucky if they make it to collect. It breaks my heart when I see some of the employees where I work that should have retired along time ago, but cannot. One woman in particular has arthritis so bad she can't even stand up straight, and her eyesight is so poor she can barely read the monitor as she takes customer service calls. She never complains, and she always smiles and says hello in the hall. And you talk about plunder...

Richard Heckler 5 years, 7 months ago

Turning Social Security over to Wall Street would not be a smart idea. This last episode would have cost Social Security an estimated 50% loss. Coverting SS to Wall Street would have cost taxpayers $4,000,000,000,000(trillion) ....not a smart move. What a way to bail out Wall Street! http://www.dollarsandsense.org/archives/2001/0301miller.html

Wall Street is a gambling casino. If one cannot afford to lose money stay away from Wall Street. Wall Street after all is not the economy it is a high rolling betting game.

All of those who lost on Wall Street will be happy that Social Security and Medicare is around. Just as were the savings and loan victims in the 1980's, ENRON victims,Maddux victims, high tech victims and all of those who wind up broke for one reason or another. Social Security may not take you on Aspen ski ventures bit it can keep one above poverty plus medicare. Life could be worse.

Social Security is an insurance plan not a risky investment scheme.

Practicality 5 years, 7 months ago

Maybe if I will not benefit from SS, I can quit paying into it and just invest or save the money myself. Can't quite stomach the idea that I pay into it and it won't be there for me down the road. Just let me take care of myself is all I ask.

MyName 5 years, 7 months ago

barry, you need to lay of the drugs man.

beatrice 5 years, 7 months ago

Tom, all I can respond with is Wow! Just Wow! And to think, John McCain would have fixed both systems by now had he been elected. Wow. I mean simply Wow! you know, just Wow. It is, just Wow.

Wow.

If Republicans are opposed to continuing national funding of Social Security and Medicaid, then they should just come out and say so. I think they should build their platform around this very concept. "Down with Social Security, Down with Medicaid -- vote Republican!"

I mean, like, Wow!

Carol Bowen 5 years, 7 months ago

It's sad that there should be money for social security, but the government spent it elsewhere. Tip O'Neil tried to protect the coffers, but was unsuccessful.

I agree that we should remove the cap on collection. We should probably limit who is elligible. Everyone should pay in, because you do not know if you will be a millionaire when you retire, but those who are millionaires do not need social security payouts.

What people do not seem to realize is that we should take care of our elders. If we do not use social security, what will we use? It troubles me that younger adults talk about social security with such disdain. It's not a gift. The money should be there. I suppose we could develop a set of laws to make children personally responsible for their elders.

OzChicklet 5 years, 7 months ago

Liberty_One (Anonymous) says…

OzChicklet, justify it all you want, but theft is theft. Just because the government does it does not make it moral. And your sad story is ludicrous. Are you telling me that you are so selfish that you wouldn't help a relative in need? Instead you demand that the government steal money so that YOU don't have to help her. What a selfish person you are. If you see poor people, help them yourself, don't steal from other people.


Yeah, I'm so selfish...I invited her to come live with me in my little 700 sq ft house, and support her best I could. Although she required constant care with dialysis. I'm sooooo selfish, all I can say is WOW....I donate money poor people that I don't even know. I do volunteer work for the American Cancer Society. I don't need to tell you everything that I do, because I'm so selfish, I don't want to share that information with you....WOW...

momfromlawrence 5 years, 7 months ago

In commenting to Hear Me, I agree that we should limit who is eligible. There are families who receive SS because their child has a 40% hearing loss. Those families really don't need the money that was originally meant for the elderly. Millionaires can take care of themselves, where as those elderly who had to struggle paying taxes and were not able to save are the ones who desperately need our help.

One person said that maybe the younger generation should start having more kids. How is this going to solve the problem? There aren't enough jobs right now for the younger generation to start paying their share of the taxes. I think that we should start taxing EVERYONE!!!!!!! The illegals do not pay taxes. They are taking jobs that our kids could be doing. Do you know that there are more illegals working than those laid off? The whole system needs to be looked at again.

As for Medicare, there are families who can't afford insurance through their employer's plans. I for one can't afford my health insurance. It would take on paycheck to pay for it. The rising cost of the premiums and the deductible makes it hard for families to afford health care. I think that health care should be provided to everyone with the same benefits, and you pay according to your wages and family size. Although the family size doesn't always work either. When a family of four with only one adult does not equal the family of four with two adults.

OzChicklet 5 years, 7 months ago

Well said hear_me. I think the best lesson for young people is to spend some significant time in a third world country, and actually see how an extended family exists. And no, the visiting young person is not allowed hide in a hotel from culture shock. I bet they come back to the states saying WOW.

momfromlawrence 5 years, 7 months ago

One more thing that I forgot to mention. Why do the tax payers of the hard working Americans have to pay for those illegals who are going to be released from prison and put on welfare or the Gato prisoners who are going to be put in American prisons for us to support? I say that those illegals who are in prison right now need to be deported and those in prison in Gato need to stay there. We have enough problems trying to pay for the Americans who are on welfare right now having babies just to stay on welfare that we don't need illegals to pay for as well.

gphawk89 5 years, 7 months ago

Yep, I wish there was an option to NOT pay into SS and then NOT reap the benefits (or non-benefits as the case will be) later on. Would have been nice to invest all that money into my 401k. I've dumped over $100K into SS and don't expect to get a cent of it back. And now we want our government to run the health care system...

OzChicklet 5 years, 7 months ago

@momfromlawrence

I confess! It was me that made the comment that folks should have more kids ;-) I forget that I'm anonymous so you don't know my sense of humor. But hopefully, by the time the babies are old enough to be gainfully employed, the employment situation we are in now, and the illegal worker situation will be improved.

OzChicklet 5 years, 7 months ago

So what happens to folks that don't want to pay into the system, and then some horrible disaster happens like a heart attack (or worse), and they have to spend all their retirement savings before planned? OR, what happens to folks that don't want to pay in, and then don't save, and then when the time comes to retire, there is no money? What do we do with them? Do they become homeless. I think this would turn into a huge problem. It's easy to say "that's their fault", but we would have to deal with a lot more people in that situation and it would affect us enormously.

OzChicklet 5 years, 7 months ago

Liberty_One - you are clueless. I am not stealing from you. You are the selfish one because you do not want to help your fellow Americans that are less fortunate than you. There are a lot of complications in third world countries and the majority of those people suffer as a result of their corrupt governments - it's not rocket science. What I advocate is certainly not what is happening in those countries. I take it that you feel we should ignore all the issues in these countries and all the affected people because of their corrupt governments. I suspect you've never spent much time in third world counties, and if you have, you probably stayed at a 5 star hotel above the stench of it all. Have a piece of cake and a nice day in your limited reality.

Richard Heckler 5 years, 7 months ago

With Treasury Secretary Timothy Geithner in the picture I'd say beware because he is too close to Wall Street and Wall Street wants your tax dollars flowing directly to them.

No one would have any input once a switch was made. Wall Street cannot be trusted. If Wall Street is down like now, and has been several times before, a retirement will have to wait until. It took Wall Street 24 years to bounce back to point A once it bottomed out in the 30's.

When you begin trusting bought out politicians and Wall Street perhaps it's time to see a therapist.

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