WASHINGTON — With today’s release of the annual
Social Security and Medicare trustees’ reports showing a combined long-term
unfunded obligation of $15.6 trillion over 75 years in these two entitlement
programs, The Concord Coalition warned that the two programs are on a fiscally
unsustainable track and urged lawmakers to respond with serious solutions rather
than free lunch plans or “do nothing” promises.
WASHINGTON — With today’s release of the annual
Social Security and Medicare trustees’ reports showing a combined long-term
unfunded obligation of $15.6 trillion over 75 years in these two entitlement
programs, The Concord Coalition warned that the two programs are on a fiscally
unsustainable track and urged lawmakers to respond with serious solutions rather
than free lunch plans or “do nothing” promises.
“This years trustees’ reports again demonstrate
unambiguously that Social Security and Medicare cannot provide the level of
benefits promised without significant retooling. Some combination of reduced
benefits and additional revenue will be required to ensure these programs are
fiscally sustainable and generationally equitable in the future. If these
programs are to remain viable, lawmakers must demonstrate the leadership and
political will to make tough policy choices now in stark contrast to
current budgetary shell games being played in Washington,” said Concord
Coalition Executive Director Robert L. Bixby.
“Lawmakers and the media erroneously focus on the solvency
date as the primary indicator of Social Security’s and Medicare’s financial
health. But solvency is misleading. It’s cash flow that matters,” said The
Coalition’s Policy Director, Ed Lorenzen. “The existence of trust fund balances
will not change the fact that these shortfalls will place tremendous pressures
on rest of the budget and future taxpayer as well as the economy as a whole. To
redeem the bonds in the trust fund and cover the shortfall, Congress will have
to cut spending on other programs, issue more debt, or raise taxes. Clearly,
‘financially solvent’ bears no relationship to ‘fiscally sound.’”
Between 2017 and 2040 the U.S. Treasury will have to come
up with more than $4.2 trillion in today’s dollars to cover the shortfalls in
the Social Security system. In 2030 alone the program will need a general
revenue infusion of $267 billion in today’s dollars to redeem its dwindling
supply of Treasury bonds. Even if taxes were raised by 2.02% of payroll to
eliminate the actuarial deficit over seventy-five years, the system would begin
to run annual cash deficits again in 2026.
Medicare’s finances are in even deeper disarray than Social
Security. According to the Medicare Trustees report, The Hospital Trust Fund
that finances Part A expenditures is already running cash deficits and will
require ever-increasing infusions of general tax revenues to stay afloat. By
2020 Medicare will require general revenue contributions equal to 25% of
individual income taxes in addition to premiums and payroll taxes dedicated to
Medicare.
“These programs must not be viewed in isolation, either
from each other or from the overall federal budget. Our focus must be on how
much these programs are going to cost over the long-term and how future
taxpayers are going to pay for them,” said Lorenzen. “According to the Trustees
report, the cost of Social Security and Medicare will grow from nearly 7.4
percent of the economy today to 12.7 percent by 2030, consuming approximately 70
percent of all federal revenues, crowding out all other discretionary spending.
These programs are simply unsustainable in their current form.”
“Congress and the President cannot afford to wait until a
crisis is imminent to take action.” Bixby warned. “The consequences of inaction
are dire. Waiting until the eve of insolvency would require a payroll tax hike
of more than one-third or benefit cuts in excess of 25 percent. Try running for
re-election on those numbers.”
“We hope that these reports, when viewed in context with
the current projections of record budget deficits will incite Congress to
action,” said Bixby. “Running huge budget deficits on the eve of the retirement
of the baby boom generation is just plain irresponsible. These reports should
be a wake-up call to get our fiscal house in order, and fast.”
The Concord Coalition is a nonpartisan, grassroots
organization dedicated to balanced federal budgets and generationally
responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob
Kerrey (D-NE) serve as Concord’s co-chairs and former Secretary of Commerce
Peter Peterson serves as president.
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CONTACT:
Tristan Cohen
(703) 894-6222
communications@concordcoalition.org
