Medicare, Social Security Owe Up to $52 Trillion to Current Retirees and Workers
December 03, 2008
Debts Up To Three and Half Times Greater Than Entire U.S. Economy
DALLAS (December 3, 2008) - If the federal government stopped the Medicare and Social Security programs tomorrow -- collecting no more payroll taxes and allowing no more accrual of benefits -- it would still owe up to $52 trillion to those who have already earned these benefits, according to a new study by the National Center for Policy Analysis (NCPA).
"The numbers are staggering," said Andrew Rettenmaier, an NCPA senior fellow and coauthor of the study. "No one thinks we are going to end these programs," he said, "but if we account for federal obligations the way private pensions and state and local governments are required to, the federal government owes up to $52 trillion (in current dollars) as of today."
To put the numbers in perspective, the size of the entire U.S. economy is $14 trillion. The newly released study determined that:
- An estimated $9.5 trillion is owed to current retirees - an amount equal to almost $250,000 per person 65 years of age and older in 2008.
- Adding the liability owed to those nearing retirement (55 and older) more than doubles the accrued debt to $20.6 trillion.
- Adding the benefits accrued by younger workers brings the total to as much as $52 trillion. The beneficiaries include all retirees, as well as anyone in the workforce above 22 years of age.
If Medicare and Social Security continue on their current course, the obligations of taxpayers will grow. In the spring, the Social Security/Medicare trustees reported that if Social Security and Medicare were to continue indefinitely, the present value of the unfunded obligation is $101.7 trillion, or seven times the size of the national economy.
Currently, the two programs combined are spending more than they are receiving in premiums and dedicated taxes:
- By 2012, one of every 10 income tax dollars will be needed to close the funding gap for Social Security and Medicare
- By 2030, almost half of all income tax dollars will be needed to close the funding gap.
- By 2070, almost 80 cents of every income tax dollar will be needed to cover the cash-flow deficit in the two programs.
"Without reform, paying for elderly entitlements will crowd out other federal spending or will require substantial tax increases," said Rettenmaier.
"The longer we postpone reform, the worse the financial picture becomes," he said. "Procrastinating will make the cost of reform even more painful."
Link to full study: http://www.ncpa.org/pub/st317/
Link to related charts: http://www.ncpa.org/email/Figure_I_and_II_Rettenmaier_Study.pdf