Anyone wondering why Social Security and Medicare should be “on the table” in budget negotiations need look no further than the 2011 Trustees’ Report issued on May 13.
As is usually the case, media accounts of the trustees’ report tended to focus on trust fund balances rather than on the cash balances and growing costs of the two programs. Viewed from a trust fund perspective, the financial condition of Social Security and Medicare may appear troubling but of no immediate concern. Social Security’s combined trust funds are projected to remain solvent until 2036 and the Medicare HI trust fund [Part A] is solvent until 2024. The Medicare SMI trust funds [Parts B and D] are permanently solvent, but only because they have an automatic draw on general revenues.
So why worry about these programs now? Why not wait another 10 years before making changes in Medicare and 20 years or more for Social Security?
One reason is that both programs are straining the federal budget now because they are paying out more than they are taking in from dedicated resources, including payroll taxes, taxation of...