Outlook for Social Security is Deteriorating
March 27, 2003
The annual report on the financial health of Social Security and Medicare was published last week. And contrary to some rosy interpretations in the press, the systems' long-term prospects are deteriorating rapidly.
Right now, Social Security and Medicare add money to the federal budget because the payroll taxes they collect are more than enough to cover the full costs of benefits both programs pay out.
- But by 2008, Social Security and Medicare will stop adding money to the federal budget and will begin draining money away.
- By 2013, to pay full benefits the two programs will need about 5 percent of all federal income taxes -- almost $100 billion -- in addition to what they will collect in payroll taxes.
- By 2040, it will take nearly half of all the federal government's income tax revenue to pay for Social Security and Medicare -- in addition to the payroll taxes they will already collect.
If we don't agree to the transfer of all that budget money, benefits will have to be cut for younger and future workers.
Social Security promises $27 trillion more in benefits than it can afford to pay. Experts warn that to avert the looming crisis, action must be taken now. The answer is to establish personal retirement accounts -- with some portion of current taxes being invested in the stock market, where it can grow and provide benefits to baby boomers when they retire.
Source: Matt Moore (National Center for Policy Analysis), "Ominous Social Security, Medicare Data," Washington Times, March 27, 2003.
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