No, Social Security and Medicare aren’t going to go broke
Here’s the headline in the Boston Globe:
“Medicare and Social Security go-broke dates pushed up due to rising health care costs, new SSA law”
Read further and you find this:
“The go-broke date — or the date at which the programs will no longer have enough funds to pay full benefits — was pushed up to 2033 for Medicare’s hospital insurance trust fund, according to the new report from the programs’ trustees. Last year’s report put the go-broke date at 2036.
“Meanwhile, Social Security’s trust funds — which cover old age and disability recipients — will be unable to pay full benefits beginning in 2034, instead of last year’s estimate of 2035. After that point, Social Security would only be able to pay 81% of benefits.”
*snip*
“Once the fund’s reserves become depleted, Medicare would be able to cover only 89% of costs for patients’ hospital visits, hospice care and nursing home stays or home health care that follow hospital visits.”
So “broke” doesn’t really mean broke. It means that SS and Medicare won’t be able to pay out at currently projected rates. While this isn’t good, and both programs should be fully funded, it’s a far cry from running out of money, which is what “broke” means.
This sort of pernicious nonsense is what feeds liars like Elon Musk, who call Social Security a Ponzi Scheme. Shame on the Globe for resorting to clickbait.
Dates on which SS and Medicare won’t be fully funded have been moved up
“Medicare and Social Security go-broke dates pushed up due to rising health care costs, new SSA law”
Read further and you find this:
“The go-broke date — or the date at which the programs will no longer have enough funds to pay full benefits — was pushed up to 2033 for Medicare’s hospital insurance trust fund, according to the new report from the programs’ trustees. Last year’s report put the go-broke date at 2036.
“Meanwhile, Social Security’s trust funds — which cover old age and disability recipients — will be unable to pay full benefits beginning in 2034, instead of last year’s estimate of 2035. After that point, Social Security would only be able to pay 81% of benefits.”
*snip*
“Once the fund’s reserves become depleted, Medicare would be able to cover only 89% of costs for patients’ hospital visits, hospice care and nursing home stays or home health care that follow hospital visits.”
So “broke” doesn’t really mean broke. It means that SS and Medicare won’t be able to pay out at currently projected rates. While this isn’t good, and both programs should be fully funded, it’s a far cry from running out of money, which is what “broke” means.
This sort of pernicious nonsense is what feeds liars like Elon Musk, who call Social Security a Ponzi Scheme. Shame on the Globe for resorting to clickbait.
Dates on which SS and Medicare won’t be fully funded have been moved up
Googles AI:
Neither the term “broke” nor the term “solvency” has any legal meaning for Social Security. It does not have debts. By statute it puts all receipts into the trust fund. Then it pays costs out of the trust fund. There is no part of the act covering what to do if there are costs and there is no money in the trust fund. It’s creators, the Congress of 86 years ago, did not conceive of allowing such a thing to happen.
Congress screwed up in 1972 by enacting automatic benefit increases without having automatic tax increases. Stagflation of the 70s brought problems within a decade. Beneficiaries living longer (11.9 years in retirement in 1940 to 14.5 years in 1982) was also a factor. They nearly reached payment issues in 1983, but they enacted a set of tax increases and benefit cuts to push out the problem. Anyone listening (which did not yet include me) knew right away that they had not fixed it.
Now people are saying stupid things and throwing around inapplicable terms when what we need is for Congress to take the responsibility that they have been ignoring for at least a generation to make adjustments to the system so that what the 1939 Congress could not conceive will not become reality.
They math is not hard. Dale Coberly and I came up with answers based on SSA numbers over 15 years ago. Incremental increases in the payroll tax are much smaller than most workers annual wage increases. (Your anecdote is not data.) You do not need to reduce benefits to make SS balance.
@Arne,
“Dale Coberly and I came up with answers based on SSA numbers over 15 years ago.”
And they are just as irrelevant today as when you first proposed them. An answer isn’t an answer when Congress isn’t listening. By the time Congress takes responsibility, the increase won’t be incremental.
Joel:
I believe it to be important to keep saying how easy it “could have” been if the nation had taken incremental steps even though some of the deciders will be dead or out of office.
@Bill,
Coulda, woulda, shoulda. All true and meaningless. I’m no fan of virtue signaling. I care about results. YMMV.
Joel:
Until a Social Security style trump arrives in the White House, Congress will await till disaster almost hits and the n react. Threats to the bastards appears to work. I am not doing the CWS stuff. My opinion is virtual signaling? The numbers are there. The action is not. So typical of our political parties. Wait till they are in crisis mode and then react.
Brookings: “Revenues that would otherwise go to making the provisions of TCJA permanent could be used instead to make Social Security solvent for at least the next 75 years.” A 1.2% swap.
Forbes Commentary: “The Social Security Expansion Act,” introduced by Senators Bernie Sanders (I-Vt.) Elizabeth Warren (D-Mass.) and Congresswomen Jan Schakowsky (D-Ill.) and Val Hoyle (D-Ore.) would raise the taxable earnings cap to $250,000, and like Larson’s bill, include investment income.
Their measure would raise more money than needed to solve the long run deficit, so the Act uses additional revenue to increase Social Security’s benefits to eliminate most elder poverty. (The Office of the Chief Actuary of Social Security, Steve Goss, and Social Security Works, a nonprofit Social Security think tank, are good sources for updates on Social Security legislation.)”
There are many ways to solve the issue. Congress has to move on it. The sooner the better. Or we can just sit here and say nothing . . . accepting our fate.
@Bill,
Yes, there are many things besides the Northwest plan that could be done. None of them will, until it becomes a crisis.
Coberly was bitterly opposed to raising the cap. His point was that if you raised the cap on taxes but left benefits the same, then SS becomes welfare. His point was that workers should pay for their retirement insurance, not milk the wealthy. While I agree with that in principle, the idea that Congress would just incrementally raise SS taxes on workers to keep SS sustainable was magical thinking, unmoored from experience.
So here we are, still staring down from the precipice.
Arne:
I do not believe Joel has said there is a need to reduce benefits. I believe the 1 tenth of one percent increase yearly for ten years would meet the needs of SS at this point. I believe we have surpassed the starting point of such a “small increase.” And it was small. The incremental increases would “probably be more on the order of 2 tenths of 1% for five years.
In which case, this would “still” keep Social Security as a program funded by Social Security withholding.
A lesson to be learned in the last few months is that we can not dependent upon politicians claiming to be for the people who are not millionaires and billionaires. Trump is teaching us a valuable lesson in how Congress is conducting itself in his presence. They will not stand up to him and his demands and they folded to his demands. Their congressional positions are more important than are the people they represent.
If the nation were to impose some of the solutions being proposed such as a leap in subjecting more income exposed to Social Security taxes. Say a doubling or tripling of the amount exposed to Social Security taxes. What would stop a trump two or three down the road from reversing it, the same as we are seeing today with tax reductions for the rich in income. And perhaps a cancellation of a part of Social Security similar to what will happen with Medicaid. If Republicans and trump can steal Medicaid funding for tax cuts, why not Social Security?
The solution to fix Social Security still resides with the people and incremental increases as Dale and Bruce and even you proposed Arne. What has to happen is an implementation of some form of the Northwest plan now. One last comment . . .
To all of you who chose not to vote because you did not like a woman or a woman of color in the presidency, voted for other candidates who were not going to win, voted for the family pet (2016) or other animals, etc. or a pox on you. It is your prerogative to do as you wish in voting. However, today you are experiencing what was brought about by your votes, silly votes, or no votes.
@Bill,
Yes, I’d be delighted to see SS continue to pay projected benefits out to infinity. But well-intentioned and rigorous proposals are sterile without Congressional support. Face it: the Northwest plan was DOA.
For decades, undocumented workers have been subsidizing SS by providing fake SS numbers to their employers. Those workers will never get benefits. Instead, those of us on SS will benefit from those payments. If Stephen Miller and his masked brownshirts over at ICE are successful in deporting 10 million undocumented workers, SS will be in even a deeper hole.
Joel:
And those funds would be included in any calculation made of SS longevity. Perhaps those people are not included in a calculation of longevity and are already taken into consideration. Even so the funding may be shy. I could probably find some info supporting my contention. I do not believe it to be necessary between us.
…last time they tried to sell this BS (Bush Co.) the programs were supposed to go bust in 2017
Jack,
Social Security is on a path to be shy of funding by 2033 now. It is a reality give or take a year. The only way to secure it is a withholding tax increase.
@Bill,
Yes. Full stop.
The % doesn’t necessarily have to increase.
Increase the “cap”.
And maybe apply the tax to revenues other than salaries. Such as divs & cap gains at say 1%.
Much like the larger issue with federal taxation. Could create a financial transaction tax, increase the standard deduction while adding taxation of divs & income. End the hedge fund loophole. Undo big chunks of the regressive changes of the Bush & Trump tax cuts. Of course a huge cut in corporate subsidies and military expenditures would also help.
There are MANY things that can & should be done. But the ruling class and their 2 political parties (and media) don’t want those things.
Just:
Thank you for your comment. The thought behind just a tax on a portion of earnings was it would be a hot poker to the eye if someone chose to eliminate a program followed funded by Labor or office help. If you start to tax other things dividends, hedge funds, and capital gain, it becomes vulnerable to claims of hurting economic growth, etc. If it is paid for by labor, the gov and rich (for lack of a better word) will not touch it.
It does make sense to take more from the upper income. “between 1979 and 2023, the average earnings for the top 1% skyrocketed by 181.7%, while the bottom 90% saw a much smaller increase of 43.7%.” Much of which can be accomplished by increasing the amount exposed to SS withholding.
Arne is really good on the topic as is Dale Coberly.
It has been a while since I have seen you. Thanks again.
It is true that solutions are hard to get agreement on, but it is not virtue signaling to point out that they are not hard to find. Congress made many changes between 1939 and 2000, link, with no president and only a couple of Congresses failing to reach some kind agreement about legislation. It has been since 1983 since the payroll tax rate was changed.
Bush’s attempt to privatize SS ushered in the current split between the parties. Sad, because voters from both parties support SS. I believe the accusation that the Republican party want to kill SS because it is a successful program. I think that Democrat’s who try to build on its success are risking extending it too much.
I have never thought the NW Plan was politically feasible, but it does make sense. Anyone discussing legitimate legislation should be aware of that.
Arne:
It does make sense and I picked up on it. Bruce caught me discussing healthcare at the one site where the Economist decided he had enough and closed it down. Bruce invited me to Angry Bear and I came here over ten years ago. Fortunately, I have Joel to help me with Angry Bear now. I (we) could really use more writers who might contribute weekly or when possible.
As said above, “There are MANY things that can & should be done. ” Just like nearly every major issue facing this country. The only problem is that Congress does not act. Take a look at Congressional rules, created by both Parties, and you will quickly figure out why the system is broken and likely will never be fixed because, “The fox are guarding the henhouse.” And, should solutions be found in a political moment by one Party, it will be overturned with the next change in the henhouse manager.
The Founders kinda f**ked up when they said in Article I, Section 5, Clause 2 of the U.S. Constitution that, “Each House may determine the Rules of its proceedings.”
https://jpmcjefferson.substack.com/p/rules-of-the-game
J.P.
I reposted your post on Angry Bear. I can delete it when I get back from the doctor if you wish me to do so (with no hard feelings). I forget you hve a blog also which I would be willing to repost from your site as your posts fit Angry Bear and are quite good. That is up to you and what will you allow Angry Bear to do. You can shoot me an email at run75441@hotmail if you wish to converse privately.
Bill, that’s fine. Feel free to repost as you please.
J.P.
Thank you.