Social Security, Medicare will be insolvent soon without adjustments

Social Security and Medicare have long been called the “third rail” of federal politics because politicians who touch either one are liable to receive a fatal shock to their electoral prospects. Some of the easiest and most effective negative campaign ads start with a variation on “Candidate X will take away your Social Security.”

For decades, we’ve known that changing demographics will require some changes to the programs. Consider the fact that in 1965, 9% of the American population was 65 or older; today it’s 15% and in 25 years, it will be 21%. The ratio of workers to beneficiaries is shifting rapidly.

The “third rail” status of these programs has made Congress leery of making any but the most minor adjustments. Adding new benefits is a lot more popular than moves to improve the programs’ fiscal health, such as increasing payroll taxes, raising the age of eligibility, or means testing.

“The future” isn’t very far off
Another factor keeping Congress from adjusting these programs proactively is the same one that any student who has ever put off a term paper until the night before it’s due can appreciate: once upon a time, the problem seemed so far away. The latest reports from the trustees for the Social Security and Medicare programs show “the future” is coming up pretty soon.

For Social Security, its general fund that pays out to retirees is expected to be solvent through about 2034. The Social Security Disability fund will likely hit the insolvency point next year, requiring a benefit cut.

Medicare’s prospects are even more worrying. Medicare Part A, which covers hospitalizations, will be in financial crisis by 2030 – just 15 years from now. Between a burgeoning over-65 population and growth in health care costs, Medicare will balloon to the point that it, not Social Security, represents the largest share of federal spending. The excellent bipartisan group Fix the Debt highlighted an estimate from the Urban Institute that “an average wage earner turning 65 in 2015 would have paid $70,000 into Medicare in their lifetime and received $213,500 in lifetime benefits.”

All of which is to say, math and a shrinking calendar will force Congress to adjust these programs soon. The longer they wait to take action, the more drastic the cuts and the more dramatic the tax increases will need to be. The Everett Herald explained well a few of the approaches Congress could take.

“By 2031, every dollar of revenue we collect will go toward mandatory spending, such as Medicare, Medicaid and Social Security, and interest on the debt,” Fix the Debt writes. All the facts, figures and percentages in the trustees’ reports can be hard to follow, but they all flow toward the same conclusion: the “do nothing” option will leave us with a federal government that carries unsustainable levels of debt and that can afford nothing beyond covering its Social Security and Medicare payments.

That is in no one’s best interest. “Third rail” or not, change is coming.
-Rob McKenna

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Rob McKenna
Rob served two terms as Washington’s Attorney General, from 2005 to 2013. He successfully argued three cases before the U.S. Supreme Court and negotiated three of the largest consumer financial protection settlements in national history, all involving mortgage lending and servicing. He is a recognized leader in the development of consumer protections on the internet, in data protection and privacy regulation.