The Social Security Trustees released their annual report on the state of Social Security and Medicare last week and the results were not encouraging. The findings made it clear that both popular programs will face budget shortfalls in the near future, and will need a financial overhaul to remain solvent over the long term. If changes aren’t made, both programs could be in dire financial straits in less than two decades; this would jeopardize the future of the tens of millions of Americans who rely on these programs.
Here are five facts about the report and Social Security reform: - When Social Security and Medicare annual costs exceed their annual income, the programs will have to dip into their trust funds; the report highlights that, at the current spending rate, Social Security is expected to deplete its Trust Fund reserves by 2035 and Medicare will deplete its reserves by 2026 unless Congress and the president make changes in benefits and financing in the near future. When the trust funds are depleted and costs continue to exceed income, the shortfall would force reduction of benefit payments. The dwindling of funds is happening quickly; next year, Social Security is expected toexceed its incomefor the first time in almost 40 years. According to CBS News, if Washington does not take action to support these programs, they will not have the resources to support the elderly as they do today.
- This strain on Social Security and Medicare is largely tied to theincreasing number of retireesand the stagnant number of people in the workforce, according to CNN. The outlet reports that the percentage of Americans 65 and older is expected to grow by more than a thirdby 2040. This increase in the number of retirees will also affect Medicare; compounded by increasing medical costs, this benefits program’s spending is expected to nearly double over the next 20 years.
- In response to the Trustees’ report,interest groups and politicians on both sides of the aisle have stressed the need for reform. Republicans are looking toscale back on costs and prevent fraud; Rep. Steve Womack (R-AR), the senior Republican on the House Budget Committee, told the press “We cannot accept this reality any longer.” Democrats, on the other hand, are looking to expand Medicare by launching Medicare For All.
- The last major legislation passed to improve the finances of Medicare and Social Security were theSocial Security Amendments of 1983. This legislationincreased the retirement age to 67, taxed Social Security benefits, and expanded Social Security coverage to include federal workers. However, the Social Security 2100 Actis currently being debated in Congress; this will increase benefits and payroll taxes in hopes of ensuring Social Security remains solvent for generations.
- In 2005, President George W. Bushtried to reformSocial Security, calling it his most important domestic priority. But ultimately he was not successful. President Bush pushed to privatize Social Security; this would have included workers diverting part of their earnings into a private account, being able to invest in five index funds, and affected up to 70 percent of all taxpayers.
