The next generation of workers has to save troubled Social Security and Medicare
Social Security and Medicare trustees say these funds are running out of money, leaving older Americans to wonder who will finance their retirement.
Most people have been paying into these trust funds throughout their working lives. While the monthly check from Social Security will be barely enough to live on, Medicare is the only way most of us can afford health care in old age.
Decades of Congress playing three-card monte with our premiums, though, could leave us all losers.
“Social Security and Medicare both face long-term financing shortfalls under currently scheduled benefits and financing,” the trustees wrote in their 2021 report. “Both programs will experience cost growth substantially in excess of GDP growth through the mid-2030s due to rapid population aging. Medicare also sees its share of GDP grow through the late 2070s.”
Social Security will pay out $2.4 trillion more than it takes in over the next decade. The program’s Old-Age and Survivors Insurance only has 13 years left to insolvency. Disability Insurance is in better shape, currently forecast to last until 2057.
When the accounts are combined, though, Social Security will run out of money in 2034, when the government will automatically reduce benefits by 22 percent.
“Lawmakers have only a few years left to restore solvency to the program, and the longer they wait, the larger and more costly the necessary adjustments will be,” the conservative group Committee for a Responsible Budget said in its analysis.
The fund for Medicare, the health insurance relied on by most Americans over 65, will run out of money in 2026, according to its trustees. Congress has not adequately funded the trust since 2003, the report added.
“Medicare’s costs under current law rise steadily from their current level of 4.0 percent of GDP in 2020 to 6.2 percent in 2045,” Medicare trustees report.
Congress has done little to address these programs’ financial health because neither solution will get them re-elected. They must increase taxes, reduce benefits, or implement a combination of both. Our gridlocked Congress, though, has shown
little ability to compromise on anything.
Finance and public policy experts have drafted dozens of thick reports on how to fix these programs. I don’t have space in this column to go into them, but every plan relies on premiums collected from future generations.
Younger Americans typically finance the Social Security and Medicare payouts of current retirees. But the next generation happens to attend the schools we underfund, live in neighborhoods we neglect and come from families whose belonging in this country too many Americans question.
I’ve written many times about how the U.S. population would have started shrinking in the mid-1970s if not for young immigrants raising their families here. New Census data shows the children of these immigrants are who will pay for future Social Security and Medicare benefits.
William Frey at the Brookings Institution, a left-leaning Washington think tank, observes that the number of Americans under 18 has dropped by 1 million since 2010, throwing off the balance between young and old. But more interestingly, the number of young people who identify as white has dropped by 5.1 million, while the under-18 population of other races and mixed-race children has gone up by 4.1 million.
“For the first time, children of color now comprise more than half (53 percent) of the nation’s total youth population, as well as in 21 states,” Frey wrote. “Clearly, children of color have not only stemmed a sharp decline in the youth population but, as they age, will be driving most of the growth in
the nation’s future labor force.”
These are the same kids who suffer from income inequality and discrimination, according to the non-profit, nonpartisan Annie E. Casey Foundation.
In Texas, a quarter of children have parents who lack
secure employment, and 35 percent live in single-parent homes. Only 70 percent of fourth graders are proficient in reading. More than a third are obese and face chronic health problems.
“Data suggest that we as a nation fail to provide children of color with the opportunities and support they need to thrive,” the foundation’s 2021 Kids Count report said. “States are failing to dismantle barriers that African American, American Indian and Latino children especially encounter. As a result, nearly all index measures show that children experience disparate outcomes in spite of their potential.”
Congress can raise Social Security and Medicare taxes, reduce benefits for the wealthy and insist retirees pay higher share of health care costs. But none of that will matter if we don’t ensure the next generation is at least as successful as ours.