ENTITLEMENTS RUN AMOK
July 11, 2007
Looking at two long-term time periods for Social Security and Medicare -- the 75-year horizon (2007-81) and the infinite horizon -- the unsustainable growth of these two entitlements becomes clear, says the Washington Times.
- Social Security's Chief Actuary projected this year that Social Security's 75-year unfunded obligation was $4.7 trillion.
- However, the U.S. Treasury must also find an additional $2 trillion to redeem the bonds presently in the Social Security trust funds.
- Thus, the real-world Social Security present-value unfunded obligation over 75 years is actually $6.7 trillion.
According to Social Security Trustees John Palmer and Thomas Saving, the problem is much worse:
- Because the deficits for Social Security continue to increase beyond the 75-year horizon, the magnitude of the fiscal problem over the very long run (i.e., the infinite horizon) is much greater than the 75-year picture conveys.
- As a result, Social Security's present-value unfunded obligation over the infinite horizon is $15.6 trillion (including the need to redeem today's $2 trillion in trust-fund bonds).
Nevertheless, Medicare is in far worse shape than Social Security:
- The present-value unfunded obligation over 75 years for Part A is $11.6 trillion.
- For all of Medicare, the 75-year unfunded obligation totals $33.9 trillion.
- At the beginning of 2007, the present-value unfunded obligations over the infinite horizon for Medicare's three programs total $74.3 trillion.
- They consist of Part A (hospital insurance), $29.5 trillion; Part B (outpatient services), $27.7 trillion; Part D (drugs), $17.1 trillion.
Thus, Medicare's present-value infinite-horizon unfunded obligation of $74.3 trillion is nearly five times Social Security's $15.6 trillion. Together, they total $89.9 trillion.
Source: Editorial, "Entitlements run amok," Washington Times, July 11, 2007.
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