The 2004 Medicare and Social Security Trustees Reports
Friday, June 04, 2004
by Andrew J. Rettenmaier & Thomas R. Saving, Ph.D.
Table of Contents
"Postponing solutions will only make the problems worse."
Based on dedicated revenues, both Social Security and Medicare are severely underfunded. Paying scheduled benefits will require significant additional funding. When we consider both annual revenue "flows" necessary to pay benefits and "stocks" represented by the programs' implied debts, we can characterize the true size of this problem. Projected annual shortfalls indicate that by 2050, if the government is to pay scheduled benefits to the elderly entitled, it will have to devote 75 percent of federal income tax revenues over and above the programs' dedicated revenues. The stock measure shows that, over the next 75 years, the combined additional funding requirements total more than $33 trillion, and the present value of their funding requirements over the indefinite horizon comes to almost $74 trillion.
Although the calculation of these revenue shortfalls span many years into the future, the search for solutions should not be postponed. Each year of delay reduces our ability to respond effectively. It is to our advantage to consider saving more now, rather than seeing our benefits diminish during our retirement years, when we have reduced earnings capacity.
NOTE: Nothing written here should be construed as necessarily reflecting the views of the National Center for Policy Analysis or as an attempt to aid or hinder the passage of any bill before Congress.