Social Security Fund to Run Out in 2035 Trustees Say
Tuesday, April 24, 2012
Social Security Fund to Run Out in 2035 Trustees
Say
By: Brian Faler, Bloomberg News, April 24, 2012
The budget outlook for Social Security is getting dimmer, the
U.S. government said, with its primary trust fund now projected to
run dry three years sooner than anticipated.
The fund that helps finance benefits for 44 million senior
citizens and survivors of deceased workers will be exhausted by
2035, the program's trustees said in an annual report yesterday.
Aid would have to be cut at that point if Congress doesn't
intervene.
Social Security's disability program, which helps support 11
million Americans, will run through its trust fund in 2016, two
years earlier than predicted. The report attributed the fiscal
stress in part to the weak economy.
The main trust fund that supports the Medicare health-care
program for the elderly will run out of money in 2024, the report
said.
The giant retirement programs are straining the U.S.
government's finances, and what to do about them is a central issue
in the election-year debate between Democrats and Republicans as
President Barack Obama seeks a second term.
"Millions of Americans rely on Social Security and Medicare for
income and for health care, and millions more will do so in the
future," said Treasury Secretary Timothy Geithner, one of the
programs' six trustees. "These programs have the resources they
need to fulfill their commitments to the American people for years
to come. But what these reports also reinforce is that we must take
steps to keep these programs whole for the future."
Combined Trust Funds
The combined Social Security retirement and disability trust
funds would be depleted in 2033, three years earlier than
projected. After that, incoming revenue would be enough to cover
only three-quarters of scheduled benefits.
House Republicans have proposed replacing Medicare with
government subsidies to help seniors buy private insurance.
Democrats and the Obama administration rejected that plan and have
said they want to find ways to shore up the traditional
program.
Neither side has offered a plan for Social Security, which at a
2011 cost of $736 billion is the U.S. government's largest single
program.
Lawmakers traded shots over the report. House Budget Committee
Chairman Paul Ryan, a Wisconsin Republican, said "rather than work
together to advance solutions, the president has opted to play
politics with seniors' care" by distorting "efforts to save and
strengthen Medicare."
'Never Weakened'
House Minority Leader Nancy Pelosi, a California Democrat, said,
"despite the repeated efforts of Republicans to privatize Social
Security and end the Medicare guarantee, these vital initiatives
remain strong" and "Democrats will always ensure they are
strengthened, never weakened."
Presumptive Republican presidential nominee Mitt Romney proposes
raising the Social Security retirement age for younger people and
indexing benefit increases for higher-income retirees to inflation
instead of wages. For Medicare, he endorsed the House Republicans'
plan, authored by Ryan.
Some Democrats said the numbers show there is plenty of time to
address Social Security's finances. "The program will be fully
funded for more than 20 years, so we have time to find smart ways
to improve it," said Senate Finance Committee Chairman Max Baucus,
a Montana Democrat whose committee has jurisdiction over the
program.
The slow economy harms the programs because, when unemployment
rises, fewer Americans pay the payroll taxes that support Social
Security and Medicare. At the same time, some people unable to find
work apply for Social Security benefits earlier than they had
planned.
Cost of Living
Also, the report said, a higher-than-expected 3.6 percent
cost-of-living adjustment awarded last year to Social Security
beneficiaries helped push up program costs. The trustees said they
anticipate beneficiaries will be awarded a 1.8 percent increase
later this year.
In addition to Geithner, the trustees are the secretaries of
Labor and Health and Human Services, the Social Security
administrator and two public representatives.
Social Security has two parts: the old-age and survivors
insurance program, which supports senior citizens, and the
disability insurance program. Each has a trust fund financed
primarily by a payroll tax split between workers and employers.
Medicare is funded through a combination of payroll taxes,
beneficiaries' premiums and general tax revenue.
Enrollment in the disability insurance program has soared in
recent years. There will be 10.9 million beneficiaries this year,
according to the report, up 64 percent since 2000.
Spending on the disability program last year totaled $132
billion, while it took in $106 billion, the trustees said. It had
$154 billion left in its trust fund last year. Once that dries up,
the report said, incoming revenue will cover only 80 percent of
scheduled benefits.
"The DI program faces the most immediate financing shortfall of
any of the separate trust funds," the report said. "Thus lawmakers
need to act soon to avoid reduced payments to DI beneficiaries four
years from now."