U.S. Social Security
Expected to Dip Into Its Reserves This Year. Aging population is boosting the costs of Social
Security and Medicare as growth projections ease, by David Harrison, 6/5/18
The Social Security program’s costs will
exceed its income this year for the first time since 1982, forcing the program
to dip into its nearly $3 trillion trust fund to cover benefits.
This is three years sooner than expected
a year ago, partly due to lower economic growth projections, according to the
latest annual report the trustees of Social Security and Medicare released
Tuesday.
The program’s income comes from tax
revenue and interest from its trust fund. The trust fund will be depleted in 2034 and Social Security will no longer be able to pay
its full scheduled
benefits unless Congress takes action to shore up
the program’s finances. Without any changes, recipients then would receive only
about three-quarters of their scheduled benefits from incoming tax revenues.
The report also said that Medicare’s
hospital insurance fund would be depleted in 2026, three years earlier than
anticipated in last year’s report. Absent changes, the program then would be
able to handle 91% of costs.
The nation’s aging population is
boosting the costs of Social Security and Medicare,
while revenue gains lag due to slower growth in the economy and the labor
force.
About 61.5 million people receive
retirement or disability benefits from Social Security and
58.4 million receive Medicare.
Cost
Surge - Social Security costs are expected to exceed income this year for the first
time since 1982.Source: Social Security trustees Note: Social Security income
consists of tax revenue and interest on trust fund securities.
The Social Security program works by
using payroll taxes
paid by workers and employers to pay for retirees’ benefits. What is left over
is invested in the trust fund. Interest earned is reinvested in the fund.
Over time, the trust fund has grown to
nearly $3 trillion. But long-running demographic trends threaten its finances.
Last year, there were 2.8 workers for every Social Security recipient, down
from 3.3 in 2007.
Treasury Secretary Steven Mnuchin said
in a statement the Trump administration’s efforts to cut taxes, reduce
regulatory burdens and overhaul trade agreements would boost economic growth
and generate new money for the country’s two largest entitlement programs.
Social Security consists of two programs, one for retirees and one for people
who claim disability benefits.
The retirement program’s reserves are
projected to be depleted in 2034, a year sooner than projected in last year’s
report.
The disability fund is expected to run
out in 2032, as opposed to 2028 as forecast in last year’s report. The
program’s financial health has improved in recent years as the growth in
disability applications has fallen, the report said.
The tax cuts signed
into law last year have slightly lowered Medicare and Social Security’s
projected revenue over the next few years. Lower income-tax rates reduced
projected revenue from the taxation of Social Security benefits. That means
less money flowing into both programs because those revenues are transferred to
the trust funds.
President Donald Trump’s decision
to end a program offering
young undocumented immigrants reprieve from deportation while allowing them to
work also reduced anticipated tax revenue into the Social Security program, the
report said. Congress has debated ways of bolstering the programs’ finances,
but hasn’t agreed on what to do.
Norb Leahy, Dunwoody
GA Tea Party Leader
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