Social Security and Medicare: The Twin Disasters That Will "Break the Bank"
Here, you get an overview of the looming bankruptcy of the Social Security/Medicare system. Politically, they are one program, which Congress is unwilling to challenge.
The unfunded liability of the two programs is now about $222 trillion. This is the estimate of Prof. Lawrence Kotlikoff of Boston University. This deficit is present value, not future value. It is what the federal government needs today to invest in the private sector in order to generate enough revenue to pay off the obligations.
To pay for Social Security and Medicare, the government would have to raise income taxes by 81%.
By 2005, the year I started this website, the combined programs of Social Security, Medicare, and Medicaid consumed almost 50% of the U.S. government's budget. For a report on this, click here.
USA Today ran a front-page story on November 15, 2005 on the looming crisis. This was two years before the recession of 2008-9 hit, which created huge federal on-budget deficits of over $1 trillion a year, 2009-2012.
For evidence of how Congress siphons off the trust fund money, refuses to count this massive borrowing as part of the official budget deficit, and then spends the money, read this. It is posted on Social Security's website.
Since the assets in the Social Security trust funds consists [incorrect grammar -- consist] of Treasury securities, this means that the taxes collected under the Social Security payroll tax are in effect being lent to the federal government to be expended for whatever present purposes the government requires. In this indirect sense, one could say that the Social Security trust funds are being spent for non-Social Security purposes.
There is no statistical escape from bankruptcy or default, either open or through inflation, yet Congress pretends that this is not inevitable. Why? Because voters will remove from office any Congressman who tells the truth about what is statistically irreversible. The question today is the form that the bankruptcy will take: outright default, mass inflation, or a salami-slicing reduction of benefits.