UNFUNDED LIABILITIES OF ELDERLY ENTITLEMENTS HITS $74 TRILLION; WILL RISE IN FUTURE
March 10, 2005
Opponents of Social Security reform say that there is not a crisis, thus ignoring the remarkable deficits facing the nation's elderly entitlement programs, says Thomas R. Saving, a senior fellow with the National Center for Policy Analysis.
While Social Security is running a surplus (at least until 2018), Medicare is running an even bigger deficit. For the first time in more than two decades, the combined deficit of the nation's two biggest elderly entitlement programs will require almost 4 percent of federal income tax revenues. Moreover:
- In 25 years, entitlements for the elderly will consume one of every two income-tax dollars.
- By 2050, when today's college students retire, government will use three-quarters of all federal income taxes to pay their retirement benefits at current tax rates.
- Eventually, retirement benefits paid to the elderly will consume the entire federal budget, crowding out every other spending program.
The present value of the difference between expected expenses and revenues of Social Security and Medicare is startling: over the next 75 years, scheduled benefits will exceed dedicated revenues by $33 trillion. On an infinite horizon, this figure reaches $74 trillion -- a figure more than six times the size of the economy and 18 times the size of the outstanding federal debt, explains Saving.
What this means is that government needs $74 trillion today, invested at the government's borrowing rate, to cover the shortfall. Since it does not have this amount, next year's liability will be even larger. As a result, Saving says reform must be adopted soon before the costs of change become too great.
Source: Thomas R. Saving, "$74 Trillion = Crisis," Wall Street Journal, March 9, 2005.
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