As they have in prior years, annual reports compiled by the Social Security and Medicare trustees painted an increasingly bleak picture for America’s two largest entitlement programs. Both reports warn that expenditures associated with the two massive federal programs continue to outstrip revenues, and that policymakers must undertake reform soon if the programs are to survive.
The Social Security report’s conclusion states simply that program assets will “begin to decline in 2021 and become exhausted and unable to pay scheduled benefits in full on a timely basis in 2033”, three years earlier than previously assumed. For the Disability Insurance Trust Fund, the picture is even more bleak. Trustees say it will be “exhausted” in 2016.
“[L]egislative action is needed as soon as possible,” the report notes, suggesting that lawmakers approve a permanent increase in payroll taxes, significantly cut benefits, find new or alternative sources of revenue to fund the program, or some combination of all three to preserve the long term health of the program. The Trustees added that reforms would need to “make significantly larger changes for future beneficiaries if they decide to avoid changes for current beneficiaries and those close to retirement age.”
The Medicaid Trustees report also paints a gloomy picture, forecasting the collapse of the Medicare Hospital Insurance trust fund, for example, in 2024. And in reality, the situation may be even more dire. The Trustees noted that the forecast assumes “a physician [reimbursement] reduction of almost 31 percent that is called for in 2013,” a reduction that Congress has voted to prevent every year since 2003 under political pressure.
Together the two entitlement programs cost taxpayers more than $1 trillion in 2011 – with $736 billion of that on Social Security alone. By comparison, total direct spending on the entire war in Iraq over multiple years, according to Pentagon estimates, was around $760 billion.
Concern about ballooning entitlement costs is nothing new. For years policymakers and advocates for spending restraint have warned that changing demographics and generous spending on the politically popular programs have created an impending fiscal train wreck on par with the public spending crises that have rocked European states like Greece.
But their efforts to curb spending have been focused on earmarks, much smaller discretionary spending programs, and defense. Such reductions are more politically palatable to many voters, but with mandatory entitlements gobbling up an ever larger proportion of overall federal spending, those reductions alone won’t put the American fisc back on the road to sustainability.
“Everybody says the entitlements are where the money is, and they’re right, but nobody ever does anything about the entitlements,” Representative Steve LaTourette (R-Ohio) told Bloomberg.
Indeed rather than trying to restrain mandatory spending, Congresses and administrations of both political parties have added new obligations to the already struggling programs in recent years, particularly on health spending, like ObamaCare and the Medicare prescription drug benefit approved during the Bush administration.
David Walker, former head of the nonpartisan General Accounting Office, suggested to FoxNews last year that politicians will have a hard time keeping those committments.
“Government has a tendency to overpromise and underfund,” said Walker, “And the fact of the matter is, if you have an unfunded promise, it’s a false promise.”
It’s a problem that whoever wins the next election will have to face.