Running on Empty
THE GOVERNMENT will be able to pay full Social Security benefits only until 2033, according to the latest trustees��� report on the Social Security and Medicare trust funds. After that, Social Security's trust fund will be depleted���and it could only cover 76% of scheduled benefits with the money it collects in payroll taxes.
The timetable is even worse for Medicare Part A, which pays for inpatient hospital care. Its trust fund will be empty in 2026. Thereafter, tax collections would cover 91% of projected expenses.
The best financed benefit programs are Medicare Part B���which pays primarily for doctor visits���and Part D, which covers prescription drugs. How do they escape insolvency? Simple. If their premiums don���t fully cover their costs, both are backed up by the federal government���s general tax revenue.
Which raises an interesting question: Why can���t Social Security and Medicare Part A get the same backup funding from general tax revenue? Currently, Social Security and Medicare Part A are financed by payroll tax collections���and it won���t be enough. For a generation, Americans have been debating how to keep these programs going. On offer has been a distasteful stew of solutions: Raising the eligibility age for benefits, reducing promised benefits, and increasing taxes on workers and their employers. No wonder we haven���t made any progress.
The counterargument: It would be costly to cover these programs��� deficits using general tax revenue. The unfunded obligation for Social Security alone is estimated at $19.8 trillion through 2095, according to the trustees. The other counterpoint: Using general tax revenue would tip Social Security and Medicare into the category of welfare programs, because they���d no longer be self-funding.
That said, these programs are arguably already backed up by general tax revenue. After all, the trust funds are invested in special-issue government bonds. When the trust funds receive interest on those bonds and when they cash some of them in, where do you think the money comes from?
The timetable is even worse for Medicare Part A, which pays for inpatient hospital care. Its trust fund will be empty in 2026. Thereafter, tax collections would cover 91% of projected expenses.
The best financed benefit programs are Medicare Part B���which pays primarily for doctor visits���and Part D, which covers prescription drugs. How do they escape insolvency? Simple. If their premiums don���t fully cover their costs, both are backed up by the federal government���s general tax revenue.
Which raises an interesting question: Why can���t Social Security and Medicare Part A get the same backup funding from general tax revenue? Currently, Social Security and Medicare Part A are financed by payroll tax collections���and it won���t be enough. For a generation, Americans have been debating how to keep these programs going. On offer has been a distasteful stew of solutions: Raising the eligibility age for benefits, reducing promised benefits, and increasing taxes on workers and their employers. No wonder we haven���t made any progress.
The counterargument: It would be costly to cover these programs��� deficits using general tax revenue. The unfunded obligation for Social Security alone is estimated at $19.8 trillion through 2095, according to the trustees. The other counterpoint: Using general tax revenue would tip Social Security and Medicare into the category of welfare programs, because they���d no longer be self-funding.
That said, these programs are arguably already backed up by general tax revenue. After all, the trust funds are invested in special-issue government bonds. When the trust funds receive interest on those bonds and when they cash some of them in, where do you think the money comes from?
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