According to a new report released by the Trump administration, Social Security and Medicare will be $88.2 trillion short of the money needed to pay full benefits for the next 75 years under current policy.
Over the next 75 years, Social Security is expected to raise $92.4 trillion of taxes but benefits will cost $120.3 trillion.
The report also details that Medicare will collect $55.2 trillion from taxes and premiums, but benefits will cost $115.6 trillion. Medicare’s insolvency is driven mostly by Medicare Part B, which covers doctors’ visits, equipment like wheelchairs, and more.
Jeremy Portnoy from Open the Books says because those numbers do not account for inflation, the actual dollar cost will be far higher. Portnoy notes that the report says the only way to address the problem is a combination of “increased borrowing, higher taxes, or reduced program spending.”
Staring Down the Infinite Horizon
The unfunded liability only gets worse.
The report notes that the Inflation Reduction Act of 2022 helped reduce Medicare spending by lowering the price of prescription drugs, but overall healthcare costs continue to rise faster than projected.
Florida Congressional Democrats suggest by increasing taxes on the wealthiest Americans could help keep the programs solvent. But Portnoy says that it would only raise a small fraction of the money needed.
Portnoy points out that research from the Cato Institute demonstrates that even if the government taxed 100% of income above $500,000 for both businesses and individuals, there would not be enough money to fund this year’s budget deficit — let alone cover the Social Security and Medicare shortfalls.
No More Safety Net?
Liabilities don’t just include Medicare and Social Security. Open the Book says America also has $47.8 trillion of other liabilities.
Some of those include benefits for federal workers and veterans, but most of it is the U.S. debt held by the public — all the money borrowed from outside entities like banks and foreign countries.
Portnoy tells Florida Daily, the Penn Wharton Budget Model predicts that if debt held by the public hits 200% of GDP, “no amount of future tax increases or spending cuts could avoid the government defaulting on its debt.”
To make the budget “sustainable” within 75 years, the government would have to immediately cut non-interest spending by 21%, raise taxes on all Americans by 25%, or some combination of both, according to the Treasury report.
