The trustees overseeing Social Security reported that the program’s trust fund will be depleted by 2033 — three years earlier than projected last year. After that, incoming Social Security tax revenue will cover only three-fourths of the benefits scheduled to be paid out through 2086, requiring Congress to either increase taxes or reduce benefits. The fiscal health of Social Security declined even more precipitously according to another, somewhat technical measure. This statistic reflects the difference over the next 75 years between projected benefits and the expected annual income of the American workers whose taxes will finance them. This measure reached its worst level since the early 1980s, when the trust fund’s imminent insolvency prompted Congress to enact a variety of changes.
At a news conference to release Monday’s reports, administration officials and program trustees took turns urging Congress to come up with the kind of bipartisan solution that has long eluded it. “Never since the 1983 reforms have we come as close to the point of trust fund depletion as we are right now,” warned Charles Blahous, one of the trustees for Medicare and Social Security. “Our window for dealing with [the shortfall] without substantially disruptive consequences is closing fairly rapidly.” Social Security’s bleak outlook is primarily driven by the ever-larger numbers of people in the baby boom generation entering retirement.
And the trustees said a major reason that this year’s 75-year forecast was worse than the last was simply that they were measuring one year further into the future. They also pointed to two unforeseen economic factors: Rising energy prices necessitated a larger cost-of-living increase to benefits, and worker earnings — and the resulting payroll taxes used to pay for Social Security — were lower than than expected. In both cases, the impact will resound for years. The trustees projected that Medicare’s trust fund, which covers the part of the program that funds hospital care, will run out in 2024, the same estimate in last year’s report.
At that point, incoming revenue from Medicare taxes will be enough to cover 87 percent of annual expenses. That share will decline to about 67 percent by mid-century, then rise to 69 percent by 2085.Those figures are slightly worse than last year’s projections. The trustees attributed the difference to changes in methodology that they adopted on the recommendation of a technical advisory panel. For the third year running, Medicare’s nonpartisan chief actuary, Rick Foster, attached a letter to the report warning that the program’s true long-term prospects are even more dire than projected because the trustees made the “unreasonable” assumption that Congress will not overrule substantial Medicare spending curbs in President Obama’s 2010 health-care law.