Recession Making US Entitlement Crisis Worse
How can one justify bestowing a triple A rating on an entity with an accumulated negative net worth of more than $11,000bn and additional off-balance sheet obligations of $45,000bn? An entity that is set to run a $1,800bn-plus deficit for the current year and trillion dollar-plus deficits for years to come?
– David Walker, Former Comptroller General of The US, “America’s Triple A Rating Is At Risk”, The Financial Times, May 12
Even as Congress hunted for ways to finance a major expansion of health insurance coverage, the Obama administration reported Tuesday that the financial condition of the two largest federal benefit programs, Medicare and Social Security, had deteriorated, in part because of the recession.
As a result, the administration said, the Medicare fund that pays hospital bills for older Americans is expected to run out of money in 2017, two years sooner than projected last year. The Social Security trust fund will be exhausted in 2037, four years earlier than predicted, it said.
Spending on Social Security and Medicare totaled more than $1 trillion last year, accounting for more than one-third of the federal budget.
The fragility of the two programs is a concern not just for current beneficiaries, but also for future retirees, taxpayers and politicians. Lawmakers say they would never allow Medicare’s trust fund to run out of money. But beneficiaries could be required to pay higher premiums, co-payments and deductibles to help cover the costs.
The projected date of insolvency, a widely used measure of the benefit programs’ financial health, shows the immense difficulties Mr. Obama and Congress will face in trying to shore them up while also extending health coverage to millions of Americans.
The labor secretary, Hilda L. Solis, noted that 5.7 million jobs had been lost since the recession began in December 2007. With fewer people working, the government collects less in payroll taxes, a major source of financing for Medicare and Social Security.
– “Recession Drains Social Security and Medicare”, The New York Times, A1, May 13