Programs vital to current and future Americans are in poor financial shape, they need additional revenue. That is just a fact. Also a fact is that the longer corrective action is delayed, the more dramatic action will be required.
Wouldn’t you think that putting these programs on a sound footing would be a priority before proposing new programs paid for with new taxes?
Even proposals to raise the Social Security payroll taxable limit are in the context of raising benefits. There are also proposals to use the CPI-E as a means to increase the Social Security COLA. And yet as you see below, without any added benefits the tax rate must be increased by 3.14 percentage points just to keep SS solvent.
To illustrate the magnitude of the 75-year actuarial deficit, consider that for the combined OASI and DI Trust Funds to remain fully solvent throughout the 75-year projection period: (1) revenue would have to increase by an amount equivalent to an immediate and permanent payroll tax rate increase of 3.14 percentage points to 15.54 percent, (2) scheduled benefits would have to be reduced by an amount equivalent to an immediate and permanent reduction of about 19 percent applied to all current and future beneficiaries, or about 23 percent if the reductions were applied only to those who become initially eligible for benefits in 2020 or later; or (3) some combination of these approaches would have to be adopted.Social Security 2020 Trustees Report
If substantial actions are deferred for several years, the changes necessary to maintain Social Security solvency would be concentrated on fewer years and fewer generations. Significantly larger changes would be necessary if action is deferred until the combined trust fund reserves become depleted in 2035.Social Security 2020 Trustees Report
Medicare Parts B and D consume ever increasing portions of the federal budget because there is no limit on funding and would be higher if physician fee suppression is not maintained. Part A is funded via a trust and unlimited payroll deductions, but even that is not enough.
The Trustees project that HI tax income and other dedicated revenues will fall short of HI expenditures in all future years. The HI trust fund does not meet either the Trustees’ test of short-range financial adequacy or their test of long-range close actuarial balance.2020 Medicare Trustees report
Wouldn’t prudence and honesty require getting ones house in order and sustainable before building an addition?
Here’s an update, better late than never I guess. The next COVID relief bill could incorporate the bipartisan TRUST Act, a bill which would establish bipartisan bicameral commissions to address the long-term solvency of major trust funds. According to a recent Committee for a Responsible Federal Budget analysis, the highway trust fund is slated to exhaust its reserves in 2021, the Medicare Hospital Insurance Trust Fund in 2024, the Social Security Disability Insurance Trust Fund in the mid 2020s, and the Social Security Old Age and Survivors Trust Fund in 2031. The TRUST Act would create a separate bipartisan commission for each federal trust fund program that spends more than $20 billion per year and is projected to be exhausted by 2035. Any recommendations from the commissions would receive a fast-tracked vote in Congress. The following is a statement from Maya MacGuineas, president of the Committee for a Responsible Federal Budget:
Politicians cannot continue to ignore the finances of some of the most important government programs. We’ve known these programs were in trouble for years, and the current economic crisis has only made things worse. The highway trust fund will likely run out of reserves next year, and Social Security is only a decade behind. When today’s youngest retirees turn 73, they can expect an abrupt 23 percent cut in their Social Security benefits under current law. This is no longer about saving these programs for our grandchildren. The benefits of our grandparents are vulnerable. The TRUST Act doesn’t cut these important programs – it brings policymakers together to identify bipartisan solutions to secure the future of these programs for tens of millions of seniors and disabled workers and hundreds of millions of workers. This common-sense proposal has the backing of members of both parties in the House and Senate. We should be clear: the number one priority right now should be addressing the current economic and public health crisis. But over the longer term, the best way to secure the economy is to couple fiscal support today with long-term reforms that bring our fiscal situation under better control. The TRUST Act sets up a thoughtful process to secure our largest trust funds for current and future generations.