Outlook Dims for Social Security
Published: April 23, 2012 - New York Times
WASHINGTON — The financial health of the Social
Security system deteriorated in the last year, while the outlook for Medicare
stabilized somewhat, the government said on Monday.
The annual report by the trustees for the two federal
programs estimated that the Social
Security trust funds would be exhausted in 2033, three years earlier than
the trustees projected a year ago.
But they left unchanged their estimate that Medicarefs
hospital insurance trust fund would be exhausted in 2024. That is the same
date that was projected a year ago, and is five years earlier than was projected
two years ago.
The central message of the new report remains the
same: the two entitlement programs are unsustainable without structural changes
that have so far eluded Congress and the administration.
One trustee, Treasury Secretary Timothy F. Geithner,
acknowledging that the new assessments are gsomewhat more pessimistic,h said
that the funds are adequate gfor years to come. But what these reports also
reinforce is that we must take steps to keep these programs whole for the
The estimates, a perennial source of political
ammunition in the debate over federal spending, debt, taxation and spending on
entitlement programs, come as Republicans and Democrats are noisily blaming each
other for the perilous straits of the programs for the elderly.
gMedicare must be reformed and strengthened or it will
soon collapse,h said Lanhee Chen, policy director for the presidential campaign
of Mitt Romney. gIt also reminds us that President Obama continues to play shell
games with the health care of our seniors, taking hundreds of billions from
Medicare to spend on Obamacare and now using a bogus experiment to conceal the
damage until after the election.h
But Representative Nancy Pelosi of California, the
Democratic leader, said that gDespite the repeated efforts of Republicans to
privatize Social Security and end the Medicare guarantee, these vital
initiatives remain strong.h She argued that the trusteesf report gdemonstrates
care reform has strengthened Medicare by extending its solvency.hWhen the
trustees issued their annual forecast a year ago, the picture was worse for
Medicare than for Social Security: the date for Medicarefs trust fund to be
drained was moved up by five years, while Social Securityfs did not change much.
Even if the trust funds were someday depleted, much of
the programsf benefits could continue to flow, as there would still be a stream
of money coming in from payroll taxes. The vexing question is how to address
what would nonetheless be an enormous shortfall — and how urgently to act.
In explaining the changes in their Social Security
projection, the trustees cited slower growth in average earnings of workers,
lower earnings from interest on the trust fundfs holdings of federal debt, and
the persistence of unemployment during the slow recovery from the recent recession.
In particular, they projected a lower estimate of
average real earnings in the future, primarily because of a surge in energy
prices in 2011 that is expected to gbe sustained,h as well as slower assumed
growth in average hours worked per week after the economy has recovered.
Meanwhile, there has been a continuing payroll
tax reduction for workersf contributions to theSocial Security system; while
the spending caps imposed by last yearfs broad debt-reduction compromise have
kept the damper on Medicare spending for now.
The trustees also acknowledged that there is a lot of
uncertainty in their forecast of future Medicare costs, which could turn out to
be gsubstantially largerh than they assume.
For example, they said, the cost reductions required
by the new health care overhaul gwill depend on the achievement of unprecedented
improvements in health care provider productivity,h which may turn out to be
There are two Social Security trust funds; the one
that covers disabilities is in even worse shape than the one for retirees. The
trustees said the Social Securityfs Disability Insurance Trust Fund will be
exhausted in 2016, two years earlier than last yearfs estimate.
Mr. Geithner, in a statement, called for any
adjustments to Social Security and Medicare to be gbalanced and evenhanded.
gWe will not support proposals that sow the seeds of
their destruction in the name of reform, or that shift the cost of health care
to seniors in order to sustain tax cuts for the most fortunate Americans,h he
There are six trustees: three cabinet officers, the
Social Security commissioner and the two public representatives.