Written by Adam Andrzejewski of RealClearInvestigations
Topline: An OpenTheBooks analysis of the nation's latest financial reports found that an additional $175.3 trillion would be needed to keep Medicare and Social Security intact until today's children reach old age.
Important facts: The Treasury projected spending over an “infinite horizon,” that is, over the lifetime of every person in the United States today.
Current Medicare and Social Security participants are expected to receive $105.4 trillion more in benefits from the programs than they contribute through payroll taxes.
Future participants under the age of 15 and even in the womb will spend $69.9 trillion more than they pay in taxes.
That's an unfathomable $175.3 trillion gap that can only be filled through “increased borrowing, increased taxes, reduced program spending, or some combination,” according to the Treasury Department.
There's no easy way to put those numbers into context. The national debt is “only” $34 trillion. The federal government has spent about $200 trillion on everything since the Constitution was written in 1787, even after accounting for inflation.
Medicare Part B, which covers doctor visits and medical equipment, is the biggest liability. It is expected that there will be a funding shortfall of $99.5 trillion.
An additional $68.8 trillion is needed to pay Social Security.
background: Medicare and Social Security must be funded through payroll taxes, health insurance premiums, and benefit taxes, a process that worked well until the 1980s.
Former President Ronald Reagan, in particular, warned of a looming funding crisis and encouraged Congress to pass the Social Security Reform Act of 1983.
But the system has remained largely the same since then.
Medicare spending will represent 2.9% of U.S. GDP in 2022, but the Congressional Budget Office projects it will reach 5.9% of GDP by 2052. Social Security spending is expected to increase from 4.9% to 6.4%.
Medicare is expected to begin cutting benefits within seven years, but the long-term effects are much more severe. Under U.S. law, the Treasury must borrow money if it doesn't have enough money to pay for Medicare and Social Security, which could soon become impossible without increasing the federal debt.
summary: There is no realistic way to generate the amount needed to avoid cuts to Medicare and Social Security payments. Politicians have been putting off this difficult conversation for decades, but soon they won't be able to anymore.
Forensic auditors at OpenTheBooks.com bring you #WasteOfTheDay.
Syndicated with permission from RealClearWire.