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Dec 5, 2008
If the federal government stopped the Medicare and Social Security programs today – collecting no more payroll taxes and allowing no more accrual of benefits – it would still owe up to $52 trillion to those who have already earned these benefits, according to a new study by the National Center for Policy Analysis (NCPA).
Of that amount, $33 trillion is owed in Medicare benefits. To put the numbers in perspective, the size of the entire U.S. economy is $14 trillion.
No one thinks we are going to end these programs. Yet these are the right numbers if we account for federal obligations the way private pensions and state and local governments are required to.
"Don't Stop Thinking About Tomorrow"
The newly released study, "Thinking About Tomorrow," by NCPA Senior Fellows Andrew Rettenmaier and Thomas Saving determined that:
- An estimated $9.5 trillion is owed to current retirees – an amount equal to almost $250,000 per person 65 years of age and older in 2008.
- Adding the liability owed to those nearing retirement (55 and older) more than doubles the accrued debt to $20.6 trillion.
- Adding the benefits accrued by younger workers brings the total to as much as $52 trillion. The beneficiaries include all retirees, as well as anyone in the workforce above 22 years of age.
If Medicare and Social Security continue on their current course, the obligations of taxpayers will grow. Last spring, the Social Security/Medicare Trustees reported that if the two programs were to continue indefinitely, the present value of the unfunded obligation is $101.7 trillion, about seven times the size of the U.S. economy.
Currently, the two programs combined are spending more than they are receiving in premiums and dedicated taxes. As a result, the government is drawing on general income tax revenues to cover the cash flow deficit. In the near future, as the baby boomers begin to retire, the magnitude of that transfer will soar:
- By 2012, one of every ten income tax dollars will be needed to close the funding gap for Social Security and Medicare.
- By 2020, one of every four income tax dollars will be required.
- By 2030, almost half of all income tax dollars will be needed.
14 Responses to “Thinking About Tomorrow”
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Helium
December 5th, 2008 at 3:00 pm
My back of the envelope calculation tells be that $52 trillion works out to $170,000 for every man,waoman and child in the country.
That’s assuming,of course, that the beneficiaries pay their share.
December 5th, 2008 at 3:01 pm
Joe, I think a good argument can be made for skipping out on this obligation.
December 5th, 2008 at 3:05 pm
Ken is obviously a young whippersnappper.
Those of us who are along in years want our benefits.
December 5th, 2008 at 4:48 pm
This is very important information. I hope it gets a lot of exposure.
December 6th, 2008 at 12:55 pm
It’s hard for me to imagine any effective Social Security fix that isn’t based on COLA reform. Medicare is completely over my head.
December 8th, 2008 at 11:41 am
I’m almost 63, so I’ve come up with plan B:
1. Work as long as I can, in a job wwith health insurance as a benefit.
2. Then die.
December 8th, 2008 at 1:16 pm
Maybe avian flu pandemic will set things in balance.
December 9th, 2008 at 11:01 am
John, I wanted to share something written by a 15-year old in a paper she submitted to me, about creeping socialism.
Even a child sees the danger herein.
Of course, I began writing about creeping socialism in 1962, in ninth grade, so you would expect I would like this paragraph.
December 10th, 2008 at 7:45 am
It is my understanding that all the Congress is in a private plan, while legislating the above mentioned programs. How about requiring those private funds to be placed in the public sector, so that the people making the rules are subject to the rules? Would help debt and accountablity. Makes sense to me.
December 12th, 2008 at 12:50 pm
Hey folks. All these estimates are conservative. They comletely ignore the belief among aging experts that within our lifetime, people are going to live as long as 150 years.
December 16th, 2008 at 4:04 pm
“Decouple Primary Care” Sounds like direct practices (direct financial relationships with patients) for primary care physicians will be in high demand.
See http://www.simpd.org for solutions.
May 11th, 2009 at 10:30 am
[...] Trust fund IOUs that the government has written to itself. So to cover these deficits, we will need one in ten income tax dollars in 2012, one in four by 2020 and one in two by [...]
May 11th, 2009 at 1:14 pm
[...] What about the truth in Social Security/Medicare financing facts? It is on the same path of self destruction. However, none want to face-up and fess-up to the cruel realities. Health care costs killed good ole GM and Chrysler, and it will also kill good ole Social Security too. Like a cancer, it is crowding out every other federal program. Those who have ears to hear, should listen to John Goodman. He explained at the National Journal Health blog, “we cannot pay benefits with Trust fund IOUs that the government has written to itself. So to cover these deficits, we will need one in ten income tax dollars in 2012, one in four by 2020 and one in two by 2030.” (click here) [...]
December 18th, 2009 at 3:35 pm
One more click I found this, thank you, god knows where I will be after this.