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Social Security reserves forecast to run dry in 2022
Question of the Day
Social Security's bank account will go bust in 2022 — the first time the program's combined trust funds will run a deficit, according to President Obama's budget released Monday.
One of Medicare's trust funds also will be in the red for much of the next decade, according to the numbers in the briefing book that the White House provided to Congress along with the budget, which lays out Mr. Obama's tax and spending plans for fiscal year 2013 and beyond.
Social Security has taken in less in taxes than it has paid out in benefits since 2010, but the shortfall has beenmade up as the government has dipped into IOUs left in the trust funds from previous years.
Monday's numbers, though, show the combined trust fund itself will run a deficit of $2.6 billion in 2022.
Together, Medicare and Social Security make up what Republicans called the "twin tidal waves" of an impending fiscal calamity. Combined with Medicaid, the three big entitlements will equal nearly 15 percent of U.S. gross domestic product by 2022.
Mr. Obama did not propose any broad changes in his blueprint, but the White House said he did take some small steps on Medicare and Medicaid, calling for slicing out $362 billion from what the programs would have spent over the next decade, or 1.7 percent of the 10-year cost for both programs.
"It doesn't mean we've solved every problem for the country going forward. Certainly, that wouldn't be the case," said White House press secretary Jay Carney. "But it does it in a responsible way, and it does it in a way that proves, as other bipartisan commissions have shown, that you do not have to decimate Medicare, end it as we know it."
All sides agree that entitlement programs are the major driver in deficits and long-term debt, and will soon begin to crowd out regular defense and domestic needs.
Both parties have struggled to summon the courage to find a solution.
In his budget, Mr. Obama focused instead on shorter-term issues. He proposed some specific spending boosts, accompanied by cuts elsewhere, and spent most of his effort pushing for tax increases on the wealthiest Americans, arguing that the budget and economic fairness demanded it.
In his seven-page letter to Congress, Mr. Obama didn't mention Social Security, but he did praise changes to Medicare and Medicaid that he said would sweat out more than $360 billion in savings.
Chief among those efforts is means-testing two parts of Medicare so that higher-income seniors would pay more for their coverage.
"The goal of these reforms is to make these critical programs more effective and efficient, and help make sure our health care system rewards high-quality medicine," Mr. Obama said in his letter to Congress. "What it does not do — and what I will not support — are efforts to turn Medicare into a voucher or Medicaid into a block grant. Doing so would weaken both programs and break the promise that we have made to American seniors, people with disabilities, and low-income families, a promise I am committed to keeping."
Republicans said if Mr. Obama sees the same dire long-term numbers on Medicare and Social Security, he should have suggested serious changes.
"If you share the view that there ought to be changes in the 'out years,' why aren't they in the budget?" said Sen. Jeff Sessions of Alabama, the ranking Republican on the Senate Budget Committee. "If you recognize, I think, as all of us do, that Medicare, Social Security and Medicaid are programs in dire danger and need to be fixed, why don't you do it today?"
Social Security is made up of two major trust funds, the Old-Age and Survivors Insurance program and the Disability Insurance program.
In total, Social Security will spend $773 billion this year, jumping to $1.4 trillion a year by 2022. But every year those payments will outstrip payroll taxes coming in to the system, draining the trust funds and leading to the 2022 deficit.
Under current law, that means Social Security would have to cut benefits that year, said Douglas Holtz-Eakin, former director of the Congressional Budget Office and now president of the right-leaning American Action Forum.
"At that point, the Social Security Administration will not have the legal means payroll taxes coming in, or holdings in the trust fund to pay full benefits, and as a result it will have to cut benefits across the board to match payroll [taxes] coming in," Mr. Holtz-Eakin said. "That's a disgraceful plan."
Social Security's spending growth will be matched by the other two major entitlements. Medicare will go from $478 billion to $908 billion, and Medicaid will rise from $255 billion in federal spending to $578 billion, according to the budget.
All sides agree that Social Security should be the easiest of the three programs to tackle.
But recent efforts to do so have been politically disastrous. President Bush's plan to add personal accounts to the system collapsed in 2005 under opposition from both parties on Capitol Hill and from seniors across the country who feared it would jeopardize their benefits.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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Stephen Dinan can be reached at firstname.lastname@example.org.
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