Each year the Medicare and Social Security Trustees release annual reports conducted by nonpartisan actuaries at the Social Security Administration and the Centers for Medicare and Medicaid Services. The reports estimate future financial obligations and revenues of the programs, including the value of each program's trust fund.
On May 13, the Medicare and Social Security Trustees released their 2011 report, and the news was troubling. For the sixth straight year, the trustees warned the programs are on an unsustainable, insolvent path, and without swift attention will leave future generations with broken promises.
Both Medicare and Social Security are running out of money more quickly than anticipated in previous reports. As more Baby Boomers reach retirement, they put more strain on the programs. At the same time, prolonged high unemployment has generated less revenue to fund the programs' obligations. The 2011 Trustees Reports say the Medicare trust fund will be exhausted in 2024, not 2029 as estimated last year, and the Social Security trust funds will run out of funds in 2036, not 2037 as previously thought.
In addition to going bankrupt sooner than the later, the report confirmed the programs are already contributing to the federal deficits and will continue doing so throughout the coming decade. For example, since 2008, the Medicare program has run cash flow deficits, and this year's deficit exceeds $32 billion. The only thing keeping the program afloat is the sale of Treasury bonds in the Medicare Trust Fund, and the redemption of these paper IOUs increases the federal deficit.
Furthermore, Social Security has entered into a state of permanent deficit, meaning the government is paying out more in benefits than it is taking in. Social Security will soon be unable to pay its beneficiaries their full benefits, and in fact, without reform, benefits will have to be cut by 23%.
Federal spending on entitlement programs is the largest driver of the federal deficit and this report confirms Medicare and Social Security need fundamental reforms, and soon. Embracing the status quo ensures a bankrupt future for these programs. American taxpayers and future generations deserve better, so we must take steps now to strengthen these vital programs. Without action, current and future beneficiaries will face significant cuts even sooner than previously estimated. The time to work together to correct the unsustainable path of these programs is now.
For too long, Congress has ignored the causes of our crushing deficit burden. The Budget Resolution (H.Con.Res. 34), which passed the U.S. House on April 15, is an honest approach to the unavoidable challenges created by Medicare and Social Security which threaten our long-term fiscal sustainability. It is a responsible plan which keeps the government's promise to those in and near retirement from any disruption and strengthens the programs for future generations.
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