June 4, 2004
The 2004 Medicare and Social Security Trustees Reports show that programs for the elderly are on an unsustainable course. The expenditures exceed the revenues to be collected, and the funding gap is projected to grow through time, say researchers Andrew J. Rettenmaier and Thomas R. Saving.
- Over the next 75 years, scheduled benefits exceed dedicated revenues by $33 trillion, measured in current dollars.
- Looking indefinitely into the future, the present value of the additional revenues required by Social Security and Medicare total almost $74 trillion.
To put that number in perspective, obligations to the elderly are more than six times the size of the economy and 18 times the size of the outstanding federal debt. Furthermore:
- Although policy makers have focused on the long-run sustainability of Social Security, Medicare's financial problem is five times as great ($62 trillion versus $12 trillion).
- And while lawmakers have not reformed Social Security (which requires $12 trillion), they have more than doubled the size of that problem by creating a prescription drug benefit (which will require additional revenues of almost $17 trillion). What can be done to avert this calamity? Clearly, we cannot sustain a pay-as-you-go system, under which promises made to today's workers must be paid by generations not yet born. Instead, we must move quickly to a funded system, under which each generation pays its own way, say Rettenmaier and Saving.
Source: Andrew J. Rettenmaier and Thomas R. Saving, "The 2004 Medicare and Social Security Trustees Reports," NCPA Policy Report No. 266, June 2004, National Center for Policy Analysis.
For report text http://www.ncpa.org/pub/st266
For Social Security report http://www.ssa.gov/OACT/TR/TR04/index.html
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