The looming entitlement bankruptcy
Entitlement reform is one of those issues that’s been around for decades, but doesn’t go anywhere. That’s despite years of warnings from the trustees of the Social Security and Medicare funds that unless policies changed, the trust funds would run dry.
Will the latest batch of warnings make a difference? Because what they show is the funds running out much sooner than anyone imagined…and that’s when the massive debt-financed spending to keep benefits going begins:
On August 31, the Social Security and Medicare Trustees issued their annual reports detailing the financial state of America’s two largest entitlement programs. The reports echo past conclusions: Social Security and Medicare are still going bankrupt.
At its current pace, Medicare will go bankrupt in 2026 (the same as last year’s projection) and the Social Security Trust Funds for old-aged benefits and disability benefits will become exhausted by 2034.
A quick look at the data proves just how broken our current entitlement programs are. An American Action Forum analysis of the data found other startling statistics, including:
Medicare’s Annual Cash Shortfall in 2020 was $495.5 billion;
Payroll taxes would have to increase more than 32 percent to pay for Medicare Part A in 2020; and
Over the next 75 years, Social Security will owe $19.8 trillion more than it is projected to take in.
That’s a lot of money, even in official Washington. But the routine is for warnings to be issued, a few alarms raises…and everything goes on as before.
That bipartisan indifference will lead to bankruptcy:
The Obama Administration oversaw a $2.4 trillion cash shortfall over 8 years (2009-2016), while the Trump Administration oversaw its own $1.6 trillion Medicare cash shortfall during the past presidential term. The Trustees project that by the end of 2021 the Biden Administration will have overseen a $446 billion cash shortfall in its first year in office. The fiscal reality is that continuing the previous two administrations’ Medicare policies and leaving Medicare unchanged all but guarantees bankruptcy.
With such unprecedented levels of cash shortfalls continuing through the budget horizon, maintaining the status quo ensures that Medicare will soon not exist for today’s seniors, let alone future generations of Americans.
Unless something big changes, of course. But don’t count on it. The costs of these programs, like so much else in the federal budget, will be covered. By even more debt.