Fund in even worse shape

So­cial Se­cu­rity to run deficit; in­sol­vency set at 2034 Medicare

The Washington Times Weekly - - Politics - BY STEPHEN DINAN

So­cial Se­cu­rity will spend more than it col­lects this year, the pro­gram’s trustees said last Tues­day, mark­ing the first time in more than 35 years that it will run an an­nual deficit as it slides to­ward in­sol­vency by 2034.

Medicare’s main trust fund is in even worse shape, sched­uled to hit in­sol­vency in 2026 — three years ear­lier than last year’s es­ti­mate, the trustees said.

The twin warnings add even more pres­sure to a bud­get al­ready strained by last year’s tax cuts and this year’s deal to boost spend­ing on de­fense and ba­sic do­mes­tic needs, leav­ing few bright spots in the fed­eral fis­cal pic­ture.

The news also pro­duced the usual fin­ger-point­ing among Democrats and Repub­li­cans, but bud­get watch­dogs said the news was so grim that it should cut through the bi­par­ti­san bick­er­ing.

“It would be a nice change if this year Con­gress and the pres­i­dent ac­tu­ally took these warnings se­ri­ously enough to do some­thing,” said Robert L. Bixby, ex­ec­u­tive di­rec­tor of the Con­cord Coali­tion.

So­cial Se­cu­rity has been strug­gling for years and turned cash-neg­a­tive this decade, mean­ing the gov­ern­ment paid out more in ben­e­fits each year than it col­lected from the pay­roll tax.

But some an­a­lysts had said it was still run­ning a sur­plus be­cause of in­ter­est on the money cred­ited to the trust fund. Now, even that crutch is gone, as even with in­ter­est rev­enue in­cluded the pro­gram will pay out more this year than it col­lects.

It’s the first time since 1982 that the pro­gram has shown an over­all an­nual deficit.

“This is deeply trou­bling and should serve as a re­al­ity check for any­one con­cerned about the fu­ture of this im­por­tant pro­gram,” said Rep. Sam John­son, Texas Re­pub­li­can and chair­man of the House sub­com­mit­tee that over­sees So­cial Se­cu­rity.

The pro­gram is slated to take in $828.2 bil­lion this year, with most of that com­ing from pay­roll taxes. It will pay out $853.6 bil­lion in ben­e­fits and ad­min­is­tra­tive costs. That will cut the cu­mu­la­tive trust fund from $2.820 tril­lion to $2.795 tril­lion — a small but sym­bolic slide.

The Old-Age and Sur­vivors In­sur­ance pro­gram, the main part of the trust fund, will have its as­sets de­pleted in 2034, at which point ben­e­fits will have to be cut by more than 20 per­cent, the trustees said.

Rep. John B. Lar­son of Con­necti­cut, the rank­ing Demo­crat on the key So­cial Se­cu­rity sub­com­mit­tee, cau­tioned against over­re­act­ing to those num­bers. He said the pro­gram “is sta­ble fi­nan­cially for now” — though there are longer-term chal­lenges.

Rather than cut ben­e­fits, he has pro­posed in­creas­ing the pro­gram’s pay­out. The higher costs would be cov­ered by an im­me­di­ate tax hike on higher-in­come Amer­i­cans and a phased-in rate hike on ev­ery­one.

“Con­gress must act now be­cause So­cial Se­cu­rity is not an en­ti­tle­ment; it is the in­sur­ance that they have paid for and earned,” he said.

The trustees said So­cial Se­cu­rity’s fis­cal po­si­tion de­te­ri­o­rated slightly from last year’s re­port. The Re­pub­li­can tax-cut law is sap­ping rev­enue, and Pres­i­dent Trump’s phase­out of the Obama-era De­ferred Ac­tion for Child­hood Ar­rivals deportation amnesty for il­le­gal im­mi­grant “Dream­ers” will also cost the sys­tem work­ers who would pay in ben­e­fits in the short term without be­ing able to col­lect on them.

Com­bined, those changes bumped up the in­sol­vency date by months.

For Medicare, the change was a three­year jump in in­sol­vency for the hospi­tal fund, ad­vanc­ing from 2029 to 2026. The trustees blamed a num­ber of changes, in­clud­ing the 2017 tax cuts, which also re­pealed the Oba­macare man­date re­quir­ing Amer­i­cans to hold in­sur­ance. That will boost Medicare pay­outs, the trustees pre­dicted.

“This re­port should elim­i­nate any doubt that Trump’s tax law yanked Medicare closer to in­sol­vency,” said Sen. Ron Wy­den of Oregon, the top Demo­crat on the Fi­nance Com­mit­tee.

Repub­li­cans, mean­while, pointed to longer-term forces: the aging pop­u­la­tion and a rel­a­tively smaller share of peo­ple in the work­force to sup­port those se­niors.

“Lack­lus­ter eco­nomic growth in pre­vi­ous years, cou­pled with an aging pop­u­la­tion, has contributed to the pro­jected short­ages for both So­cial Se­cu­rity and Medicare,” said Trea­sury Sec­re­tary Steven T. Mnuchin, one of the trustees.

Con­ser­va­tives said the trustee re­ports should spur Con­gress to get to work on solv­ing the im­bal­ance.

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