By now everyone has heard the news:
WASHINGTON – The Medicare and Social Security trust funds are both on “unsustainable paths” — as they have been for years — and will be exhausted by 2024 and 2033, respectively, a trustee report released Monday said.
And by now maybe you have heard the misinformation.
Joe Scarborough said this morning that Social Security will be “bankrupt” three years earlier than projected last year and it will just keep ratcheting up until it will be no time until it is gone. “It’s going down,” he said. In fact, here was the graphic on the screen as the panel discussed the issue:
“Social Security benefits to be depleted by 2033.” What tommyrot that is. Benefits, far from being depleted, will continue long after 2033, even if nothing is done.
But first, let’s look at Medicare. As the USA Today story noted:
The trustees have predicted the depletion of the Medicare Trust Fund every year since they first began issuing reports in 1970, and they ultimately extend the deadlines out a few more years.
Yes, look at this from the Congressional Research Service:
As you can see, since such reports have been created, the projections of insolvency have been fairly imminent. Consider this from Sarah Kliff at Wonkblog:
…the trust fund doesn’t really decide Medicare’s fate. Instead, it’s an accounting term. When we talk about the Medicare Trust Fund, we’re pretty much referring to where our payroll taxes to finance the insurance program get stored. If the Trust Fund runs out, that means it can no longer cover everything it’s supposed to pay for. But Congress could — and, many think, would — make up the difference by borrowing, cutting spending elsewhere and using the savings to plug the hole, or finding new sources of revenue.
“The fund is a fiscally neutral element in the goods and services of Medicare finances,” Theodore Marmor, Spencer Martin and Jonathan Oberlander wrote in one article on the topic. “Congress can change the taxes that finance Medicare if it has the will. Likewise, it can change the benefits and reimbursements of the program.”
So, you can easily see that Medicare won’t be “bankrupt” in 2024, even though there is a definite problem with its financing that has to be soon addressed (apart from just shifting the cost on to future seniors, as the Romney-Ryan budget plan does*).
Likewise, Social Security is not now bankrupt and won’t be in 2033. Why? It is simple, as John Harvey at Forbes pointed out:
It is a logical impossibility for Social Security to go bankrupt.
Here’s how the Social Security Administration explains it:
The current Social Security system works like this: when you work, you pay taxes into Social Security. The tax money is used to pay benefits to:
- People who already have retired;
- People who are disabled;
- Survivors of workers who have died; and
- Dependents of beneficiaries.
The money you pay in taxes is not held in a personal account for you to use when you get benefits. Your taxes are being used right now to pay people who now are getting benefits. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.
Because wage growth has been slow, and because the economy hasn’t exactly been great, money going into the trust funds has slowed down, but Social Security is not—not—paying out more in benefits than it is bringing in. Payroll taxes, along with interest from the special issue Treasury bonds the program holds, plus taxes on Social Security benefits paid by high-income taxpayers, all add up to an increase in the Social Security surplus.
Get that? The program’s surplus is still growing.
But even though Joe Scarborough got it wrong about Social Security and bankruptcy, he did get something right. He said the program’s future finances could be fixed in about twenty minutes.
One way of doing that—without cutting benefits—would be to eliminate the Social Security tax cap, which is currently set at $110,100. Eliminating the cap would mean that those who make more than that (about 6% of wage-earners) would then have to pay Social Security taxes on all their wages. Just this simple move would guarantee payment of full benefits for at least 75 years.
So, although we will hear a lot of Republicans talking about the demise of the two most important social stabilizers we have, using trust fund projections as tools to severely weaken, if not destroy, our safety net, the truth is that the future of both programs can be fixed without dramatically altering their nature, if there is the political will to do so.
And it is up to voters to impregnate the Republican Party with that will.
* Sadly, Willie Geist, a fixture on “liberal” MSNBC from 4:30am until 8:00am, defended the GOP budget plan and Paul Ryan, saying,
He doesn’t do this because he likes throwing old people out on the street; he’s trying to make it solvent. He’s trying to save it in the long term…he’s trying to do something big…
Willie, of course, will never have to worry about surviving his old age on reduced Social Security benefits or worry about how he is supposed to come up with the thousands upon thousands of dollars to get health care when he is too old for television.