For at least 15 years and perhaps as long as 20, the folks at the CBO and Congress have been aware of a new looming wave of unfunded mandates that will overwhelm Social Security and Medicare in the next 10 to 20 years. Despite what you hear about a trust fund (it doesn’t exist), both programs were supplemented from general revenues with over $200 billion each to make sure they had money to cover costs. Soon the under-funding will crest beyond $1 trillion annually.
There haven’t been many solutions offered.
George Bush wanted workers to be able to save one percent of their paycheck. That went nowhere.
Congress increased the retirement age two years. Just in the last 15 years, however, life expectancy increased an additional two years.
The Social Security Administration budget analysis early last decade stated that life expectancy would increase 9 years this century. By 2014, that guess went to 11.9. Does this number seem low? It should. Last century life expectancy increased 29 years. The century before, life expectancy increased an estimated 12 years. This century’s current guess of 11.9 years is just weak. By the way, the unfunded mandates the SSA estimated in 2003 were around $23 trillion. In 2014, the increased life expectancy guess increased the mandates to $44 trillion. Imagine with life expectancy increased to 29 years, like last century, the unfunded mandates would be through the roof. Just to cover the unfunded mandates now estimated, SSA proposed an increase of employee and employer taxes rates from 7.65% each (today’s rate) to nearly 15%. If you want to see our economy tank, well, this kind of increase will kill the Golden Goose.
I propose some ideas under Three Ideas section. But what would you do? Is there a path forward that doesn’t tax or national into infamy.
Raise taxes in perpetuity? Cut benefits? Perhaps there is a third solutions that can make us all much richer.