Social Security And Medicare Will Be Bankrupt In 16 Years; Here’s Why
Published : June 11, 2018
That day is coming even sooner than expected after the release of the 2018 Social Security and Medicare Boards of Trustee Report. The annual report provides the financial condition of the two programs which account for 42 of Federal program expenditures.
Social Security is anticipated to be insolvent—as in no money—in 2034. This is the same time frame provided in the 2017 report. However, Medicare’s trust funds are anticipated to run dry by 2026, which is three years earlier than projected. The report stated that both funds will start tapping into the reserves because the amount of income collected from payroll taxes and interest earned by the funds will not cover the total costs.
The coffers are dwindling, and the decision to tap into the reserves will empty it even faster. As President Donald Trump told the G7 Summit, the U.S. should not be the world’s piggy bank from which everyone is robbing. Trump is right, and the solution to this problem is not to take from the reserves and cross your fingers that there will be enough because there very clearly will not be enough.
The bottom line is the United States does not have the money to pay for all of the Baby Boomers and those who claim Social Security or Medicare. This year’s estimates for Medicare, which is the primary medical coverage for many elderly folks with disability, was off by three years. Another year from now, the estimation may be even sooner. With the birth rate continuing to decrease, the elderly living longer, and less people paying into the system, the math works out in no one’s favor.
The reality is this has been a kick the can down the road issue since its inception. Social Security was never meant to be the sole source of retirement funding, and coverage was specifically limited when the act was passed in 1935. While President Franklin D. Roosevelt wanted to give to American people, no one considered Social Security as the means by which to live out one’s life. It was regulated for benefits going only to the person who paid in to the system, for the amount of time they actually worked to pay into that system. But over time, more hands got into the piggy bank and began giving more money to more people for more reasons.
It was already a decade ago that about one-third of seniors relied on Social Security for 90 percent or more of their retirement income. And the other two-thirds relied on it for most of their income. The population has only gotten older, and more people have become reliant on Social Security to fund their final years. In 2017, about $990 billion in Social Security was paid in total to a monthly average of 69 million people. And more were waiting in line. Last year more than 5.6 million new applications were completed to receive benefits.
Over the 83-year history of the program, $20.9 trillion has been collected, and $18 trillion of that has been paid out. The simple math is that there is $2.9 trillion left. One more economic downturn, and we all have our pockets turned out.
The solution, of course, is to find politicians who will be adults about the situation and govern. For far too long, Social Security has been the third rail—meaning you do not touch the issue or you will never be around politically to fix it. Our presidents do not want to acknowledge it. President Trump has been lukewarm on any changes to entitlement programs. Members of Congress will not debate on it because again: third rail. They want to be re-elected, but they do not want to govern.
The numbers do not lie—the politicians do—but the numbers do not. Americans will see taxes go up, benefits go down, more divisiveness, and less action by elected officials.