Last Modified: Thursday, July 31, 2014 12:09 PM
Senior citizens who want Congress to keep its hands off their Social Security and Medicare benefits were given some powerful ammunition this week from the trustees who oversee both programs. The long-term future of both still isn’t good, but immediate prospects look promising.
The Strengthen Social Security Coalition and Social Security Works, two promoters and protectors of the programs, were singing praises after hearing the trustees say the immediate financial outlook is good.
“Today’s Social Security Trustees Report should give workers and their families renewed confidence,” said Nancy Altman, co-chair of Strengthen Social Security. “Social Security ran a surplus last year, is on track to run one this year, and has an accumulated surplus of $2.8 trillion. If Congress listens to the American people and requires millionaires and billionaires to pay their fair share, the report shows that all benefits can be paid for the next three quarters of a century and beyond...”
Eric Kingson, founding co-director of Social Security Works, said, “... Fully affordable and structurally sound, Social Security will meet all its obligations to the American people as far as the eye can see, with only a modest increase in revenues.”
The news for Medicare was also positive. Its trust fund won’t be exhausted until 2030, four years later than last year’s estimate. President Obama’s administration was quick to say Medicare’s hospital trust fund has gained 13 years of solvency since the president took office. Marilyn Tavenner, director of the administration’s Center for Medicare and Medicaid Services, said the Affordable Care Act (Obamacare) deserves much of the credit.
The Associated Press said experts question whether less spending in health care is the result of a sluggish economy or a dividend from Obamacare. It notes that private insurers have been shifting more costs to patients. The cost of Medicare Advantage plans that are offered by private companies contracting with Medicare will also increase.
What happened to those dire forecasts we have been hearing for years about Social Security and Medicare running out of money?
The bad news may have been tempered a bit by the trustees report, but it is still out there. The two programs accounted for 41 percent of all federal spending last year and that is going to increase. The trustees said the cost of paying Social Security benefits is expected to exceed tax and interest revenue beginning in 2020 and the trust funds will have to be used at that time to pay benefits. The trust fund balances will decline to $2,698 billion by the end of 2023 and be depleted in 2033.
If nothing isn’t done before 2033, the Social Security taxes coming in at that time would only be able to pay 77 percent of scheduled benefits. Medicare will only collect enough payroll taxes when the hospital trust fund is depleted in 2030 to pay 85 percent of inpatient costs.
Solvency for the next 75 years would require an immediate and permanent payroll tax rate increase of 2.83 percent, the trustees said. The tax would have to go from 12.4 percent to 15.23 percent (employees and employers each pay 6.2 percent of that current 12.4 percent). The trustees said solvency for 75 years would also require an immediate and permanent 17.4 percent reduction in benefits for all current and future recipients.
Increasing the retirement age is another alternative. The full retirement age had been 65 for many years, but it was increased in 1983 for people born in 1938 or later. It has gone up gradually, but becomes 67 for people born after 1959.
None of the three alternatives is likely to happen in the foreseeable future. Republicans aren’t going to pass any taxes. Democrats, who are staunch defenders of Social Security and Medicare, will fight any attempt to cut benefits or raise the retirement age. However, Treasury Secretary Jacob Lew said the trustees report makes it clear the programs must be reformed “if we want to keep them sound for future generations.”
Social Security Disability Insurance hasn’t received a lot of publicity, but it is in bad shape. Its trust fund reserves will be depleted in the fourth quarter of 2016. When that time comes, continuing income for the DI Trust Fund will only be able to pay 81 percent of scheduled benefits.
In order to put a human face on these numbers, the trustees said the Social Security and Disability Insurance programs at the end of 2013 were paying benefits to about 58 million people. They included 41 million retired workers and dependents of retired workers, 6 million survivors of deceased workers and 11 million disabled workers and dependents of disabled workers.
An estimated 163 million people paid Social Security payroll taxes in 2013. They paid 6.2 percent of their earnings up to a total of $113,700 last year. The two Social Security support organizations mentioned earlier want that salary limit raised to require “millionaires and billonaires to pay their fair share.”
Senior citizens would agree to that change, but nothing else in Social Security or Medicare. They have vigorously opposed financing solutions offered by some Republicans, even when the proposed changes didn’t apply to people currently drawing benefits. It is a highly emotional issue.
Jim Beam, the retired editor of the American Press, has covered people and politics for more than five decades. Contact him at 515-8871 or email@example.com.
Posted By: GARY PROCTOR On: 8/2/2014
Title: Docproc: The real percentage
This story "accurately" claims that taxes on SS would "only" have to be raised 2.8% from 12.4% to 15.23%. One organizer called that a minimal revenue increase. Allow me to net this out. This increase sounds small but it is actually over 22%. 12.4 + 22% =15.2.% That means 22 % MORE revenue will be collected. 11% more from personal paychecks and11% more from employers just to employ you. In other words that lousy 2% pay raise you got would be gone if not your job in total. THEN WE ARE TOLD THAT 17% OF BENEFITS WOULD HAVE TO BE CUT AS SWELL AND THIS IS GOOD NEWS?