The Social Security and Medicare trustees issued their 2017 annual report on Thursday, and it began with an alarm bell.
“Both Social Security and Medicare face long-term financing shortfalls under currently scheduled benefits and financing,” the trustees wrote in the summary of the 268-page document. “The Trustees recommend that lawmakers take action sooner rather than later to address these shortfalls.”
The Trustees also projected the biggest increase in payouts in years—a 2.2% increase—which comes to an average of about $28 per person.
Insolvency is on track for 2028 for the disability fund and 2034 for seniors. Insolvent, however, does not mean empty; it means that the funds would not be able to completely fulfill its debts to the public. It’s not as bad as a $0 check sent to American seniors, but the stakes are still high.
As the Committee for a Responsible Federal Budget, a non-partisan group dedicated to balancing the budget, noted in a paper on Friday, the cuts would be “large” and “abrupt” and growing from 23% in 2034 to 27% in 2091. The late-century date may prove reassuring to some, but a 23% cut takes the average Social Security benefit payout from around $1,400 to $1,080. This would be a significant blow.
A root cause for the financial woes for Medicare and Social Security is the aging baby boomer population, and the trustees estimate the cost jumps will be higher than any GDP growth that could potentially offset things. Meanwhile, lawmakers have not made progress addressing the difference between these two numbers by raising more money, raising the retirement age or dialing back payments.
“The gap is getting bigger, and politicians have their heads in the sand,” said Marc Goldwein of the Committee for a Responsible Federal Budget.
Politically, the available options are incredibly explosive. Raising taxes is unpopular, and restricting payments to seniors is also unpopular. This leaves both Democrats and Republicans at an impasse.
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Read the CRFB analysis here