Business

A strong labor market stabilized Social Security and Medicare funds

The financial health of Social Security and Medicare, two of the nation’s most important safety net programs, improved this year as a stronger-than-expected economy attracted more workers to the job market. However, the overall financial prospects of the popular programs remained bleak.

Annual reports released Monday by trustees of the retirement and retirement programs showed both were still facing long-term deficits that could ultimately lead to cuts in pension and health benefits. The reports showed that the Social Security and Disability Insurance programs combined would not have enough money to pay all of their obligations in 2035. Starting in 2036, Medicare will no longer be able to pay all of its hospital bills.

About 70 million people receive Social Security benefits and more than 66 million participate in Medicare.

The fate of popular programming remains a contentious political issue that is expected to become more intense as the November presidential election approaches.

President Biden has pledged and called for blocking any cuts to Social Security and Medicare Support the programs through higher taxes on the rich. Former President Donald J. Trump, the presumptive Republican nominee, proposed this year that he was open to cutting the programs, saying that “a lot can be done in terms of the demands for cuts.” He later walked back those comments and vowed to protect the programs.

In a statement on Monday, Mr. Biden highlighted Republican proposals that would cut funding for Social Security and raise the retirement age for eligibility for benefits. He promised to be a bulwark against such policies.

“I will always fight for America’s seniors and stop Republicans from cutting Social Security and Medicare,” Mr. Biden said.

Biden administration officials said the improved outlook for the programs was a sign that Mr. Biden’s economic agenda was working and insisted they would oppose any proposed cuts.

“Seniors have worked a lifetime to earn the benefits they receive, and the Biden-Harris administration will continue to oppose cuts to both programs,” Treasury Secretary Janet L. Yellen said in a statement. “We are committed to taking steps that protect and strengthen these programs that Americans rely on for a secure retirement.”

Social Security Commissioner Martin O’Malley said the pension program could continue paying benefits as long as Americans continued to work and called on Congress to provide more money for the trust fund to ensure its long-term viability. Term of solvency.

“More people are paying Social Security contributions thanks to strong economic policies that have led to impressive wage growth, historic job creation and a consistently low unemployment rate,” Mr. O’Malley said.

The reports said the combined Social Security Old Age and Survivors Insurance Trust Fund, which pays retirement benefits, and the Disability Insurance Trust Fund would be depleted in 2035, a year later than previously forecast. At this point, 83 percent of the planned benefits would be available for payment.

The old-age and survivors’ insurance trust fund alone is likely to run out of money in 2033, the same year as previously forecast.

The Medicare Hospital Insurance Trust Fund, which covers hospital care for Medicare patients, will no longer be able to pay all of its bills starting in 2036, five years later than trustees estimated last year. The improving forecast for Medicare’s finances reflects the higher-than-expected payroll taxes that help fund the program. It also benefits from some recent technical policy changes that will impact Medicare spending over the next decade.

Medicare spending has historically grown much faster than the economy, leaving the constant threat of deficits. But the difference between economic growth and Medicare spending growth has narrowed over the past 15 years, a trend that has also been observed took some pressure off the finances of the program.

But even with the improved forecast, trustees warned that long-term financial health of the program would require either an immediate increase in Medicare taxes from 2.9 percent to 3.25 percent of wages or an 8 percent cut in Medicare hospital benefits or the implementation would mean major changes if this were the case. It took longer to set in.

The report also included a slightly improved forecast for Medicare spending on drugs and outpatient care over the next few decades, even though these parts of Medicare are funded through general tax revenues rather than special revenue sources.

Budget experts warned Monday that despite a modest improvement in the programs’ finances, their long-term fiscal trajectory remains a concern.

“Too few politicians are willing to propose serious reforms and make the difficult decisions needed to strengthen and save the program,” said Jason Fichtner, chief economist at the Bipartisan Policy Center. “Instead, leading voices on both sides have stuck their heads in the sand and proposed purely partisan policies or vowed not to touch the program.”

It remains a challenge for lawmakers to maintain the programs without cutting benefits. But the lobbying group representing retirees called on lawmakers to find a way to ensure they remain solvent.

“For long-term sustainability, Congress owes it to the American people to find a bipartisan solution that ensures people continue to receive their hard-won Social Security benefits in full for decades to come,” said Jo Ann Jenkins, executive director of AARP. “Older Americans make up the largest voting bloc in the country and will hold leaders in Washington accountable if they fail to protect these programs.”

Source link