Tag: "Social Security"

Social Security Finances: Getting Worse and Worse

The just-released 2013 Trustees Report on Social Security’s long-run finances shows an infinite horizon unfunded liability of $23.1 trillion. This massive shortfall is 50 percent larger than U.S. gross domestic product and almost twice the federal debt held by the public. Social Security began reporting its infinite horizon fiscal gap in 2003. Back then it was $10.5 trillion. On an inflation-adjusted basis, the gap’s risen 74 percent leaving the system in far worse shape than when the 1983 Greenspan Commission “fixed” it.

Larry Kotlikoff, Daily Policy Digest/Yahoo Finance.

America Just Got Poorer

Today’s Social Security and Medicare Trustees Reports announce that the hospital insurance portion of Medicare’s unfunded liability is down from last year. But many news reports are overlooking the bad news: Medicare’s total long term deficit, which is essentially unchanged, is offset by an increase in the unfunded liability in other entitlements, especially the Disability program. The total unfunded liability for both programs this year is nearly $69 trillion, more than the $66.2 trillion reported last year, according to the Trustees.

table 1

How Much Do We Owe?

The way we currently measure our country’s indebtedness does not capture the amount of money government has borrowed from itself and the vastly larger amount of money government has promised in future spending through programs such as Social Security and Medicare. Nor does it take into consideration the government’s ability to raise taxes or reduce spending to cover these obligations. The fiscal gap does both.

  • It is the present value difference between future projected spending (including servicing the official debt) and future taxes over an infinite time horizon.
  • In 2012, the United States’ fiscal gap grew by $11 trillion to a mindboggling $222 trillion ― the largest of any country in the world relative to the economy.
  • According to the latest generational accounting published by the International Monetary Fund in 2011, taxes on future generations would have to increase by 21.5 points to close the fiscal gap.

Larry Kotlikoff and Nick Troiano in Roll Call.

Medicare FFS Cut by 2 Percent

You may have been under the impression that the sequester cuts were aimed solely at defense and discretionary spending and that entitlements such as Social Security and Medicare would be unaffected. CMS recently issued this notice that Medicare will cut two percent from provider payments in its fee-for-service (traditional Medicare) program starting April 1 –

This listserv message is directed at the Medicare FFS program (i.e. Part A and Part B). In general, Medicare FFS claims with dates-of-service or dates-of-discharge on or after April 1, 2013, will incur a 2 percent reduction in Medicare payment. Claims for durable medical equipment (DME), prosthetics, orthotics, and supplies, including claims under the DME Competitive Bidding Program, will be reduced by 2 percent based upon whether the date-of-service, or the start date for rental equipment or multi-day supplies, is on or after April 1, 2013.

HT: Donna Kinney.

Australia Compensating Organ Donors, and Other Links

Working Longer

An increase in the average retirement age from 64 to 68 would save about 20 percent in social security payments since the average number of years in retirement would be cut by about 20%. Similarly, an increase in retirement age to 70 would save about 25 percent in social security retirement benefits. Either change would also add significantly to revenue from social security taxes since workers would be employed for several additional years. Therefore, such increases in age of eligibility for social security benefits would go a long way toward solving the looming social security financial “crisis.”

More on this issue in The Becker-Posner Blog.

Gene Steuerle: Raising the Retirement Age is a Progressive Reform

On the front page of the Washington Post on March 11, 2013, Michael Fletcher connects different the life expectancies of the poor and rich to the debate over whether Social Security should provide more years of retirement support as people live longer. He mistakenly leaves the impression that adjusting the retirement age for increases in life expectancy hurts the poor the most. In fact, such adjustments take more away from the rich. Let me explain how.

Source: The Government We Deserve blog.

What Entitlement Reform Means to Liberals

  • Social Security: ‘Chained CPI’. Savings: $112 billion.
  • Social Security: Lift cap on taxable earnings. Revenues: $500 billion or more.
  • Social Security: Change the benefit formula. Savings: Would close half of Social Security shortfall.
  • Medicare: Expanded means testing. Savings: $20 billion.
  • Medicare: Faster payment reforms. Savings: $10 billion.
  • Medicare: Drug rebates. Savings: $135 billion.

Source: POLITICO.

Social Security in One Graph

In May, 2012, the American Academy of Actuaries published its look on the 2012 Social Security Trustees’ report. Figure 1 of the report is reproduced below.

Bad News on Social Security, and Other Links