Social Security will run a permanent yearly deficit when looking at the program’s tax revenues compared to what it must pay out in benefits, the program’s trustees said Friday in a report that found both the outlook for Social Security and Medicare, the two major federal social safety-net programs, have worsened over the last year.
Medicare’s hospital insurance trust fund is now slated to run out of money in 2024, or five years earlier than last year’s projection, while Social Security’s trust fund will be exhausted by 2036, a year earlier than the prior projection.
The trustees stressed that exhaustion of the trust funds doesn’t mean the programs will stop paying all benefits. Social Security could fund about three-fourths of benefits past 2036, and Medicare could pay 90 percent of benefits past 2024 under current trends.
The figures come as Congress and President Obama are wrestling over whether to make major changes to the entitlement spending, and Republicans said the new projections should force the debate to turn in their direction.
“Today’s report makes it clearer than ever that doing nothing is not an option. The failure to act means current as well as future beneficiaries, will face significant cuts even sooner than previously estimated,” said three top House Republicans on the Ways and Means Committee, which oversees both programs.
Treasury Secretary Timothy Geithner, the managing trustee of the boards of trustees for the two programs, said the report shows the need to act “sooner rather than later,” but said Mr. Obama has actually put forward an outline calling for changes to stabilize the finances for the major entitlements programs.
And Health and Human Services Secretary Kathleen Sebelius argued that Medicare would have been in worse shape without the new health care law Democrats passed last year, which reduced billions of dollars of Medicare payments.
Social Security began running an annual deficit in 2010 when looking at tax income and benefit payments. The gap right now is made up by payments from the trust fund, which in theory has built up over the years when the program ran an annual surplus.
Charles Blahous, one of the trustees, said the gap between tax revenues and benefit payments is now “a permanent feature of the program’s finances going forward.”
Still, Michael Astrue, the Social Security Administration’s commissioner, said the gap was not a major issue compared with the broad size and scope of Social Security.
“It is a rounding error in terms of its significance, in my opinion,” he said.