Atrios on the Social Security report released today:
Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent or some combination of the two.
Roughly, this would require increasing both the employee and employer share of the tax from 6.2% to 7.05% (there might be some employment/wage impacts of such a change so this is a rough take).
A small price to pay to ensure Robert Samuelson never writes another column.
And it's not even clear that we'll have to pay that.
Kash at The Street Light has more on the report, including some graphs I left out, but the basic message is that little has changed, though both trust funds are now expected to last an additional year:
Social Security and Medicare Outlook, by Kash: Today the 2007 reports on the Social Security and Medicare programs were released. For a summary, see the Status of the Social Security and Medicare Programs.
One of the most interesting things about the report is the contrast between the status of the two programs. From the summary:
The financial condition of the Social Security and Medicare programs remains problematic; we believe their currently projected long run growth rates are not sustainable under current financing arrangements.
Projected OASDI tax income will begin to fall short of outlays in 2017, and will be sufficient to finance only 75 percent of scheduled annual benefits in 2041, when the combined OASDI Trust Fund is projected to be exhausted. Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase of 16 percent in payroll tax revenues or an immediate reduction in benefits of 13 percent or some combination of the two.
As we reported last year, Medicare's financial difficulties come sooner-and are much more severe-than those confronting Social Security. While both programs face demographic challenges, the impact is greater for Medicare because health care costs increase at older ages.
...The projected 75-year actuarial deficit in the Hospital Insurance (HI) Trust Fund is now 3.55 percent of taxable payroll, up slightly from 3.51 percent in last year's report... The projected date of HI Trust Fund exhaustion is 2019, one year later than in last year's report... The program could be brought into actuarial balance over the next 75 years by an immediate 122 percent increase in the payroll tax, or an immediate 51 percent reduction in program outlays or some combination of the two.
Yes, you read that correctly. The SS program will only be able to cover about three-fourths of its expenses by the year 2041; the Medicare program will reach almost the same point in 2019. Fixing the SS shortfall would require a 16 percent increase in payroll taxes; fixing the Medicare shortfall would require a 122 percent increase in payroll taxes. ...
But given the enormous variation in the outcomes one gets depending on the assumptions one makes, the main point I take from this is not to get too worked up about these long run projections - there's a good chance that they could be substantially wrong, and the problem really could just go away on its own.
The Social Security problem, that is. With Medicare, there are virtually no reasonable assumptions that one can make that make the problem go away.
Finally, it's worth noting one last interesting detail. From the summary ... President Bush must, by law, propose legislation that at least attempts to address the Medicare problem with his next budget, next January. So after six years of ignoring the problem (and in fact making it far worse, thanks to the prescription drug benefit he championed without thinking about how to pay for it), Bush must finally go on record with how he thinks the problem should be solved.