A False Sense Of (Social) Security
September 18, 2000
Some political observers are warning that the American electorate is being anesthetized to the fact that existing Medicare and Social Security benefits are already unaffordable and unsustainable. Talk of adding a prescription drug benefit to Medicare and beefing up Social Security benefits for working mothers and widows only encourages a false sense of security and contributes to the public perception that all will be well.
But these programs are headed for financial disaster, analysts warn.
- Over the next 75 years, the real Social Security deficit is projected to be about $21 trillion, inflation adjusted.
- And even before adding a prescription drug benefit to Medicare, Part A of that program -- which covers hospital bills -- is facing a deficit of $12 trillion over the next 75 years.
- Trillions more will be needed to finance Part B -- which covers doctors' bills, home-health services and other outpatient costs.
- Those lulled by the prospect of Social Security drawing on its trust fund must recognize, analysts point out, that the fund is fiscally and economically meaningless -- it is simply an accounting fiction, because the money has already been spent.
According to Federal Reserve Chairman Alan Greenspan, eliminating Social Security's long-term deficit would require a 200 percent increase in long-term productivity. Few economists believe that is possible, because greater productivity requires -- in addition to greater output per worker -- a greater number of workers. But by the 2020s, the labor force will be growing only about one-tenth as fast as in the last quarter century.
Spending on seniors presently consumes 35 percent of the budget -- up from just 16 percent in 1965. By 2050, according to White House projections, major benefit programs for older Americans will consume an incredible 84 percent of budget outlays.
Source: Peter G. Peterson (investment banker and author), "Our Graying Budget Priorities," New York Times, September 18, 2000.
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