THE SENIOR WAVE
February 15, 2005
Social Security and Medicare have received more in payroll taxes than they have paid out in benefits for several decades. The declining U.S. population growth rate, however, is already taking its toll. Last year, the two programs combined spent more than they took in, requiring a general revenue subsidy of about $45 billion. The magnitude of the deficits in these two programs will soar in the years to come, says John C. Goodman, president of the National Center for Policy Analysis.
Social Security and Medicare are in dire financial shape, warns Goodman:
- By 2010, the federal government will need almost $150 billion in additional funds to pay promised benefits.
- Five years later, the size of the annual deficit will double; five years beyond that, it will double again.
- In just 15 years, the federal government will have to raise taxes, reduce other spending or borrow more than $750 billion to keep its promises to America's senior citizens.
As the years pass, the size of the deficits will continue to grow, says Goodman. Without changes in worker payroll tax rates or senior citizen benefits, the cumulative shortfall in Social Security and Medicare revenues compared to promised benefits will top more than $2 trillion by 2030, $4 trillion by 2040 and $7 trillion by 2050.
These deficit numbers include projected inflation. Yet even in 2004 dollars, the numbers are still staggering. Valued in today's dollars, the annual Social Security deficit will top $50 billion in 2020, $250 billion in 2030 and $400 billion in 2050. Adding Medicare's deficits, the federal government will need more than $500 billion in 2020, $1 trillion in 2030 and $2 trillion in 2050 to fund elderly entitlement programs alone, says Goodman.
Source: John C. Goodman, "The Coming Fiscal Deluge," Brief Analysis No. 502, National Center for Policy Analysis, February 15, 2004.
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