The financial health of Social Security and Medicare has improved this year due to a stronger economy attracting more workers to the labor market, but the overall financial outlook remains grim. Trustees of the programs released annual reports showing that both still face long-term shortfalls that could result in reduced benefits. Social Security and disability insurance programs combined may not have enough money to pay all obligations by 2035, while Medicare will be unable to pay all medical claims starting in 2036. President Biden has pledged to block any cuts to the programs and has called for higher taxes on the rich to shore up their finances. The administration has vowed to resist any proposed cuts to Social Security and Medicare.
Biden administration officials attribute the upgraded outlook for the programs to the president’s economic agenda and have promised to oppose any efforts to cut benefits. Social Security Commissioner Martin O’Malley emphasized that as long as Americans continue to work, the retirement program will be able to pay benefits. Congress is called upon to provide more funding for the trust fund to ensure long-term solvency. The reports indicate that the combined Social Security Old-Age and Survivors Insurance Trust Fund and Disability Insurance Trust Fund would be depleted in 2035, with 83 percent of scheduled benefits available. The Old-Age and Survivors Insurance Trust Fund alone is projected to run short of money in 2033.
The Medicare Hospital Insurance Trust Fund is estimated to run short of money in 2036, which is five years later than previously projected. The improved forecast for Medicare’s finances reflects stronger-than-expected payroll taxes and recent policy changes affecting spending. Medicare’s spending historically outpaces economic growth, but the gap has narrowed in the last 15 years. Despite the improved forecast, trustees warn that making the program financially healthy in the long term would require immediate tax increases or benefit reductions.
Budget experts caution that the long-term fiscal trajectory of the programs remains concerning, with few politicians willing to propose serious reforms to strengthen them. Preserving Social Security and Medicare without reducing benefits poses a challenge for lawmakers. The lobbying group AARP urges Congress to find bipartisan solutions to ensure the long-term sustainability of the programs. Chief Executive Jo Ann Jenkins stresses the importance of protecting these vital safety net programs for older Americans and holds leaders in Washington accountable for doing so. Efforts to maintain the solvency of Social Security and Medicare will be pivotal in ensuring the financial security of millions of Americans.
