Social Security and Medicare are Running out of Money

Sadly the congress of the United States delays confronting serious problems to the last minute. The debt ceiling was reached in January and there is casual discussion about adjusting it or doing major budget changes while the treasury secretary juggles the bills that are due now. We have an even big problem looming that will impact everyone.   

Social Security and Medicare are running out of money.

Medicare’s trust fund is projected to be exhausted by 2028. Social Security’s trust fund is projected to be exhausted by 2035. When that happens the money each fund will dispense will be equal to incoming receipts.  According to the Washington Post payments to doctors and health plans will likely be 90% of current reimbursements starting in 2028 and a 20 percent cut for all seniors receiving a Social Security check in 2035.

So, those are the two basic options to solve these issues: raise taxes or cut benefits. You could do similar things today. For example, to make Social Security solvent for the next 75 years, legislators could raise the tax rate from 6.2% to 8.1%. According to current actuarial projections, this would fix the problem until 2095.

Democratic lawmakers say that both Social Security and Medicare can be addressed without any cuts to the program — an approach expected to be codified in Biden’s upcoming budget, which is set to be released next month. Some liberal lawmakers have pushed for a one-line change to federal law that would require general funds from the Treasury Department to be used to pay off the shortfalls in the programs and make beneficiaries whole. Some liberal advocates, meanwhile, have pointed out that tax hikes would take care of the funding shortfall. One proposal to lift the current cap on earnings subject to Social Security payroll taxes, endorsed by Sen. Bernie Sanders (I-Vt.) Sen. Joe Manchin (D-WV) and others in the Democratic caucus, would extend funding for the program for decades. That cap is now about $160,000.

Will congress do anything before the last minute?  Not likely.