A new report released by the Trump administration says that under current policies, Social Security and Medicare will be $88.2 trillion short of the funding needed to fully pay benefits for the next 75 years.
Over the next 75 years, Social Security is expected to collect $92.4 trillion in taxes, but benefits will cost $120.3 trillion.
The report also details that Medicare collects $55.2 trillion in taxes and premiums, but costs $115.6 trillion in benefits. Medicare’s bankruptcy is primarily caused by Medicare Part B, which covers things like doctor visits and wheelchairs.
Jeremy Portnoy of Open the Books says these numbers don’t take into account inflation, so the actual dollar cost will be much higher. Portnoy noted that the report says the only way to address the problem is a combination of “increased borrowing, increased taxes, or reduced program spending.”
Staring at the infinite horizon
Unfunded liabilities will only get worse.
The report notes that although the Anti-Inflation Act of 2022 lowered prescription drug prices and helped reduce Medicare spending, overall health care costs continue to rise faster than expected.
Democrats in the Florida Legislature have suggested that raising taxes on the wealthiest Americans could keep the program solvent. But Portnoy says he’s only able to raise a fraction of the money needed.
Portnoy pointed out that the Cato Institute study shows that even if the government were to tax 100% of income over $500,000 for both businesses and individuals, there would not be enough money to finance this year’s budget deficit, let alone cover the shortfalls in Social Security and Medicare.
Don’t you need a safety net anymore?
Debts don’t just include Medicare and Social Security. Open the Book states that America has another $47.8 trillion in debt.
That includes benefits for federal employees and veterans, but most of that money comes from U.S. debt held by citizens, money borrowed from outside sources like banks and foreign countries.
Portnoy told The Florida Daily that Penn Wharton’s budget model predicts that if national debt reaches 200% of GDP, “no matter how much we raise taxes or cut spending in the future, the government will inevitably default on its debt.”
To make the budget “sustainable” within 75 years, the government must immediately cut non-interest spending by 21%, raise taxes on everyone by 25%, or do a combination of both, according to a Treasury report.
