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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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.