Trustees Report Huge Projected Deficits in Social Security and Medicare; NCPA Says Drug Benefit Adds to Worsening Situation

3/23/2004

From: Sean Tuffnell of the National Center for Policy Analysis, 800-859-1154

WASHINGTON, March 23 -- The long-term deficits in Social Security and Medicare total $72 trillion, almost seven times the size of the U.S. economy. That's the conclusion of the annual report of the Social Security and Medicare Trustees released earlier today by the Treasury Department. According to the National Center for Policy Analysis (NCPA), the deficit totals exceed even the most pessimistic estimates of outside economists.

"This is a crisis that can't be ignored," said NCPA President John C. Goodman. "The longer we wait to do something about it, the worse the financial picture gets."

In a briefing Tuesday on Capitol Hill, NCPA Senior Fellow and Social Security and Medicare Trustee Thomas R. Saving reported that:

-- Social Security faces an unfunded liability of $10.4 trillion.

-- Medicare's unfunded liability is $61.6 trillion - six times greater than Social Security's.

-- The prescription drug benefit alone faces a funding gap of $16.6 trillion - more than 50 percent greater than Social Security's.

-- By 2020, the combined deficits in these programs will consume more than one-fourth of all federal income taxes.

-- By 2030, about the midpoint of the baby boomer retirement years, deficits in the two programs will consume more than half of all federal incomes taxes.

-- By 2050, when today's college students will reach retirement age, Social Security and Medicare will require more than three- fourths of all income taxes just to pay benefits currently promised.

Both Social Security and Medicare are pay-as-you-go programs, meaning payroll taxes from today's workers pay for the benefits of today's retirees. The Trustees have signaled for several years that because Americans have begun to live longer and have fewer children, the two programs would soon no longer collect enough dedicated revenue to pay for benefits they are promising today's workers.

"The problem is much worse than anyone had previously projected," said Goodman. "We've been warning for years about an impending train wreck. The trustees are telling us the train has already left the tracks."

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