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Social Security running out of funds
U.S. Treasury Secretary Timothy Geithner, right, speaks during a press conference addressing Social Security and Medicare at the Treasury Department with Secretary of Health and Human Services Kathleen Sebelius, left, and Secretary of Labor Hilda L. Solis, center -- May 12, 2009
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TEXT OF STORY
Kai Ryssdal: We've been hearing for years now that Social Security's in trouble. That the retirement trust fund is going to collapse under the weight of the wave of baby boomers that's about to hit it. Add a once-in-several-generations economic slowdown, the prognosis doesn't get any better. The trustees of the Social Security and Medicare programs issued their annual report today. Social Security will be out of money by 2037. That's four years earlier than the most recent forecast. Projections for Medicare are even worse as Marketplace's John Dimsdale reports from Washington.
JOHN DIMSDALE: Medicare already spends more than payroll taxes take in. And the health-care trust fund runs out in 2017 -- two years earlier than the trustees reported last year. Today, Treasury Secretary Timothy Geithner said Medicare's financial challenges are larger and more imminent than Social Security.
TIMOTHY GEITHNER: Medicare faces demographic challenges, rapidly growing health-care costs and the short-term outlook has been hurt by the recession.
The choices for Congress are stark. Either raise taxes on both employees and employers, the traditional way the programs are paid for, or cut benefits. David John at the Heritage Foundation says raising payroll taxes would probably increase unemployment. Currently, he says, companies pay just over 7 percent of a worker's salary into both programs.
DAVID JOHN: If you increase that from say 7 percent to 8 percent, that worker becomes more expensive to the employer. And the employer is much more likely to start to explore replacing that worker with a machine or something like that.
Fixing Medicare's finances depends on reducing overall costs for retirees. Social Security will continue to build up a surplus until 2017 and that will last until 2037.
BARBARA KENNELLY: It's three decades out there.
Barbara Kennelly with the National Committee to Preserve Social Security and Medicare says there's still time to save Social Security. And Treasury Secretary Geithner promised the Obama administration will do that, after they solve health care.
In Washington I'm John Dimsdale for Marketplace.
I think we are being told lies about this whole "Social Security is going broke" situation. What happened to all of the benefit's no one collected, because the potenetial beneficiary passed away before they could collect?
We were told "People are living longer", so the retirement age was raised. Wrong. A few people lived to be 106, and threw off the curve. This is the Gov't we are talking about. A real accountant could straighten this whole thing out in no time.
This is just depressing. The once American dream to retire may not be an option for the younger generations that have to rely on a risky stock market. This was foreseen years ago and our so-called "leaders" did nothing. Sometimes being a good leader is making the tough decisions (like adjusting the retirement age which will probably irritate a lot of older voters) so future generations can enjoy the same American dreams their predecessors got to have.
I remain amazed that people believe that a "single-payer" medical system is the solution to all problems.
To begin with a single-payer system run by OUR government would both raise raxes and cut benefits. Don't forget that it would be a much, much larger (if you're mathematically inclined think A >> B) program than the WW II mobilization. Think about the amount of graft and corruption involved there.
Another option that everyone is scared to talk about is the orderly re-righting of Social Security's focus away from being a retirement vehicle back towards being a safety net. It's not a violation of any promise if you change the rules for people not yet in the system. 10 year olds can easily be told, today, they'll pay 2% (not 7%) into the fund and be entitled to disability, but not retirement. That, they'll be responsible for on their own.
We just shut down a large scheme whereby one group was paid by another, and a lot of people got hurt. We can let Social Security get to the same point and watch it explode, or we can make a concerted effort towards getting people off the government payroll by giving them an entire lifetime to prepare.
You incorrectly outline only two choices for fixing Medicare: either cut benefits or raise taxes. There is a third. Congress can enact sweeping single payer health care for every American, thus pooling the cost of the high-use elderly with the low-use young, strapping Americans, creating a true insurance pool, saving money and increasing outcomes for all of us.
OK, asume the report is correct and the "Trust Fund" is depleted to zero in 2037, including distributing the FICA taxes collected in 2037. Would the total taxes collected that year be any more if we dropped the fiction of the Trust Fund and simply collected the right amount of taxes each year? NO!
Remember, by law, the excess FICA (and Medicare) taxes must be "invested" in U.S. Govt. "obligations", i.e. bonds. What does the government do with the money it gets when it sells the bonds to the Trust Funds? It spends it, of course. On anything else.
I think we'd be a lot better off if we were honest about it. Abolish the so-called Trust Funds, collect only what's needed each tyear for thst year's Social Security and Medicare benefits, and call the excess taxes collected for general expenses what they are.
Oops - politicians don't want to call it as it is.
