Will Social Security Be Cut As Early As 2016?
In their annual report to Congress on the financial condition of Medicare and Social Security on Friday, the trustees of these two programs announced that Medicare’s trust fund will be insolvent in 2026, two years later than expected, and Social Security’s in 2033. What this means is that after those dates, the entitlement programs will begin spending more than they take in from taxes and interest from trust funds established in the programs’ net gain years, and will not be able to pay out full benefits as such.
The Medicare trust fund exhaustion date was revised back two years from the 2012 report due to lower projected spending in the future for skilled nursing facilities and larger than previously projected medical costs thanks to the Affordable Care Act.
Still, in 2016 Social Security will not be able to pay full promised benefits for the disabled, with the remainder of Social Security being scaled back to 77% of promised benefits in 2033. This will affect more than 50 million Americans. Between 2006 and 2011 the number of people collecting Social Security disability benefit increased by more than 25%. Similar cuts are expected in Medicare benefits, currently collected by 57 million Americans.
Social Security trustee Blahous warned “it’s getting very late in the game to deal with Social Security’s finances in a realistic way. [This report] shouldn’t mislead us into thinking we have until 2033” for Social Security reform.
In his response to the report, House Budget Committee Chairman Rep. Paul Ryan's spokesperson said, “Today’s report is yet another reminder that Medicare and Social Security are in great danger. We need to protect and strengthen these critical programs. And we must take action now, so we can keep our promises to current seniors and future retirees.”
The Obama administration has proposed by switching to an inflation measure called “chained CPI” which “will reduce deficits and improve Social Security solvency.” Obama’s proposal is opposed by senior advocates like the AARP, while some Republicans including Rep. Ryan praised chained CPI as being a good step in the right direction.
AARP Vice President Nancy LeaMond said, "Too many politicians in Washington talk about changes to Social Security without considering the impact in income security such changes will have on real people. One example of this is the so-called ‘chained CPI’ — a fancy Washington term that really means cutting Social Security and veterans’ benefits.”
Although all sides of the debate understand that entitlement reform is necessary for the national debt as well as for the millions of Americans who do and will eventually depend on entitlements. However, there has been little agreement on the third rail of politics. Every year the Trustee report to Congress brings entitlement reform back into the spotlight, but with campaigns for the 2014 election in full swing, it is unlikely that anything will be accomplished this time around either.