Social Security, Medicare 'train-wrecks:' Warnings: The Swamp
The Swamp
Posted March 25, 2008 5:00 PM
The Swamp

by Mark Silva

Train wrecks ahead:

The Social Security trust fund will run out of assets in 2041, the program's trustees said today, repeating an earlier projection. And spending on Medicare will reach a legal limit much sooner -- by 2014 -- requiring the next president to propose changes to avert the first train wreck.

"As the baby boom generation moves into retirement, these programs face progressively larger financial challenges," Treasury Secretary Henry Paulson, one of the trustees, said at a press conference today. "The Medicare program poses a far greater financial challenge than Social Security."

Social Security will also start paying out more in benefits than is collected in payroll taxes by 2017, according to the report of the Social Security trustees released today. In order to keep the program on track, Paulson said, the payroll tax rate will have to be raised by 3.2 percentage points or benefits cut.

“"This report confirms the need for action,’’ Paulson said. “The sooner we take action to strengthen Social Security's financial footing, the less drastic the needed reforms will be, and the fairer reforms will be to future generations.’’

The reports brought quick commentary from the White House as well as the presidential campaign trail.

“The trustees report yet again triggers a funding warning in Medicare – signaling the program is in serious straits as it faces a $36 trillion unfunded obligation,’’ saidJim Nussle, director of the White House Office of Management and Budget – pointing to proposals the president has made to curtail spending.

“In each of the last three years, the president has proposed responsible steps to slow the growth rate in Medicare – offering a more aggressive proposal each year to reflect the growing magnitude of the problem,’’ Nussle said. “It is disappointing that congressional Democrats have once again chosen to ignore entitlements in their budgets. Inaction is irresponsible. But there is still an opportunity during budget negotiations for the House and Senate to help prevent this oncoming fiscal train wreck.’’

President Bush’s proposed budget for fiscal year 2009 proposes cutting the growth in Medicare spending from a rate of 7.2 percent to 5 percent over five years.

Presidential candidates are not stepping up as forcefully as they should, according to Isabel Sawhill, a Brookings Institution scholar.

“The latest report from the trustees shows once again that the aging of the population along with rising health care costs per capita threaten to bankrupt the country if nothing is done,’’ Sawhill said today. “Yet, none of the presidential candidates has been honest with the American public about the magnitude of the challenge and the importance of dealing with it sooner rather than later.”

Sen. Hillary Clinton (D-N.Y.) today was focusing on Arizona Republican Sen. John McCain’s talk of opening Social Security accounts to personal savings accounts – a plan that the Bush administration has promoted without success.

“Sen. McCain said something stunning the other day,’’ Clinton said today. “He pledged to continue President Bush's attempts to privatize Social Security. He said, and I quote, ‘as part of Social Security reform, I believe that private savings accounts are a part of it, along the lines that President Bush proposed.’ ‘

“Social Security privatization is a bad idea whose time has come and gone,’’ Clinton said.

Sen. Barack Obama (D-Ill.) said this today:

“Today’s report should give Americans confidence that we can keep Social Security strong for future generations if we come together and address its real but manageable long-term cash flow issue.

“But the report also shows the cost of Washington’s failure to overcome the special interests and pass health care reform that expands coverage and lower costs, which would keep Medicare strong and affordable for America’s seniors. As president, I will reduce costs in the Medicare program by enacting reforms to lower the price of prescription drugs, ending the subsidies for private insurers in the Medicare Advantage program and focusing resources on prevention and effective chronic disease management.

“I’ll also bring Democrats and Republicans together to provide every single American with affordable, available health care that reduces health care costs by $2,500 per family. By investing in proven measures to improve the health of all Americans and reduce health care cost across the economy, we can ensure that the Medicare program remains strong for future generations."

Yet Clinton and Obama already are members of the Democratic-led Senate.

House Republican Leader John Boehner (T-Ohio) suggested the Congress has ignored repeated warnings about the crisis spelled out in the trustees’ reports.

“The need to reform Medicare and Social Security to preserve the programs’ benefits for future generations of American seniors is clear,’’ Boehner said. “ The Social Security and Medicare Trustees have repeatedly warned Congress and the American people that the programs must be reformed or future benefits will be threatened, and today’s report is no exception. We face a demographic tsunami of nearly 80 million retiring Baby Boomers and rising healthcare costs.

“Congress can’t sit idly by while these programs go bankrupt,’’ he said. “We must act now.’’

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The Republicans have proposed a solution to the Social Security crisis. Democrats didn't like that. In fact, the Queen B says she is not going to raise taxes nor increase the retirement age. Well, that is no solution.
The entire federal entitlement program needs to be abolished and completely overhauled. But the Dems just want more taxes and more spending, which is killing the U.S. economy.

It was so funny when the mainstream media and the Republicans made fun of Al Gore for saying we should put these funds in a 'lockbox' and protect them. Just one more example of how much better off this country would be had he become president.

Paulson said, the payroll tax rate will have to be raised by 3.2 percentage points or benefits cut.
Those are not the only options.
The money spent on the Iraq blunder could have made SS and Medicare invulnerable to any "trainwreck". The money is there, it's just a question of priorities. One more reason to remove the GOP from all houses of government.















So how many years has this went on without a resolve. President after president ignores the issues. Where is the House and Senate members, they should be working on this. Naw, instead, they waste 85% of the time wasting time. Speaking on the floor about an issue that no one cares about. Politics has gotten so out of hand, and their is no one to fix it except the voters.

if the seniors citizen get cuts in medicare why dont we cut that idiot in the white house benefits when he gets out of office, I dont believe he deserves one cent from the tax payers

Wasn't the money for Social Security supposed to be in a lock-box all along? Who spent the money and why do we have to bail it out in higher taxes or reduced benefits?

The problem was, is, and will be systemic. Our economy is based on cash flow, meaning at its basic level, those working support all. When Treasury Bonds are sold the currency created chases a slower growing supply of goods or services. This is precisely defined as inflation. Selling more bonds for inflated adjusted benefits only feeds the cycle.
The only long term storable wealth is knowlege. You don't need to reinvent the wheel.

The Social Security Administration along with all the other post-WWII federal offices need to be overhauled. There is wasteful spending in Washington; the most notorious being in the Department of Defense which is the biggest culprit to creating that trillion dollar deficit. This administration has raided those social programs to fill the coffers of DOD so that Bush/Cheney's War costs will come out of our pockets to provide wealth for their pockets.

Here is my solution for the social security dilemma:

1) MAJOR FINES for all employers who hire illegal immigrants and THEN put the money back into social security.

2) Confiscate businesses that hire illegal employees and put them on the auction block. The money will go back into social security.

3) Set the early retirement age to 65 and actual retirement to 68 beginning with those who were born in 1947.

4) Increase social security percentages contributions from those corporations who OUTSOURCE to foreign lands since we are not benefitting from those employees paying into social security. This will have a double effect to encourage the return of jobs to the U.S. also.

5)Lower the legal employment age of students in certain areas (i.e McDonald's, retail) to 15 to:
1) a larger work force to pay into social security.
2) create a sense of responsibility at a younger age, and build character.

5) Allow the option to seniors who have reached the 65 or over mark to continue to work and pay into social security to receive a larger benefit when they do retire, or a reduced benefit based on their employment earnings. The logic in the second choice is that their emeployment will more than likely allow them more income coupled with the reduced social security benefit.

Hillary, Barak, John - if you want to steal my ideas, at least give me credit; I have made a file of my suggestions and will be listening. THE TRUTH

Wasn't the money for Social Security supposed to be in a lock-box all along? Who spent the money and why do we have to bail it out in higher taxes or reduced benefits?

Posted by: Sherry | March 25, 2008 5:52 PM

The money paid into Social Security doesn't wind up in a pile like Scrooge McDuck's money vault. It's invested in Treasury securities, and then spent. All Social Security has is a pile of IOU's from the Treasury. Until 2017 or so, the amount coming in will exceed the amount going out, the surplus being, again, invested in Treasury securities. After that, the situation reverses; the amount going out will exceed the amount coming in, and the difference will have to be made up by cashing in those securities. The money for that will have to come out of the general fund, read: our taxes, either explicitly FICA tax or other Federal taxes. By 2040 or so, all of those Treasury securities will be gone, and the system will be on a strictly pay-as-you-go basis.

I like the idea of expanding the investment horizons beyond Treasury securities, which are very safe but don't have a high yield. If the Social Security "trust fund" (actually, a pile of IOU's as explained above) had done as well as my 401(k), which I've had for 36+ years, including the 1987 crash and the post-9/11 free fall, we wouldn't be having to have this conversation.

The hazard of investing the Social Security money in the market is that the Federal government gets to have a large voice in the operation of publicly-held companies, because there is so much money involved. A current example is the weight that CALPERS swings. One way around that is to make the investments be controlled by individuals, not the government; that's the idea behind private savings accounts in Social Security.

FOr specific solutions to this integrated problem facing our nation with Social Security and Medicare see my blog

One way around that is to make the investments be controlled by individuals, not the government; that's the idea behind private savings accounts in Social Security

Posted by: DaveB | March 25, 2008 9:15 PM


Yeah, sure. Private accounts through companies like, perhaps, Bear Stearns. Folks, privatization of social security means gambling with your money in investment firms that might go kaput or the CEO takes a night flight to Argentina with your cash. I wonder what amount of kickback the Bush administration and his REpublican supporters would have gotten if the privatization of social security had become a reality. They wanted to go that route to hide the fact that this Repugnant administration was pilfering (stealing) our social security funds to finance their war.

As the Rev Wright might say "The chickens of the ponzischeme called Social Security have come home to roost"

The best solution is privatization. If that 14.9% of your pay that the gov't confiscates from you the worker every payday were allowd to be put into individual's private investments, there would be a lot of wealth created for America's middle class. If you have a hard time visulaizing this concept, go read-up on compound interst first.


Putting those funds in Al' little lockbox would be a good idea, what gov't spending are you going to cut since these current SS tax receipts are not being put in a lockbox, but are used for current gov't spending?

Blah, blah, blah

These "warnings" have been coming for years and years.

Of course limits will be imposed. Countries all over the world with similar programs are facing the exact same issue.

Can we please find market-based solutions and put the money back in the hands of US taxpayers who know best how to provide for their own situations.

It seems that at least everyone agrees that Social Security, Medicare/Medicaid need some attention.

The question is what sort of attention

Ask yourself this:

Who knows better what to do with your money? You or some elected official in DC who has never even met you, much less knows anything about your situation?

As for me, I'll take my chances with myself.

"The Truth" points to one company that collapsed. Yet, he ignores Walgreens, McDonalds, GE, United Technologies, Visa, Google, Microsoft, and on and on and on -- companies that are are successful and grow.

Thanks truth. Sometimes I get tired of pointing out the obvious. Republics never seem to tire of spouting the BIG LIE.

Social Security is not the problem. The problem is with the rest of our out of control spending starting with the bloated Dept. of Defense. Don't forget that Chimpy and his gang of incompetents have not even priced our Iraqi misadventure into the budget. It is a 'special appropriation'.

Please, no more 'charge it' Republic administrations. We can't afford them.

"In fact, the Queen B says she is not going to raise taxes nor increase the retirement age.

But the Dems just want more taxes and more spending, which is killing the U.S. economy."

Posted by: John D | March 25, 2008 4:55 PM

Well, which one is it Dyslin? In the same breath you say that Hillary Clinton (leading Democrat) won't raise SS taxes and then that Democrats only want to raise your taxes.

So, umm, which one is it? And do you WANT SS taxes raised or not? The only thing anyone can discern out of this post is that you hate Hillary Clinton no matter what she does.

Not that you ever had "it," Dyslin, but what little you had appears to be completely gone. You sound like a blithering idiot.

"The best solution is privatization. If that 14.9% of your pay that the gov't confiscates from you the worker every payday were allowd to be put into individual's private investments, there would be a lot of wealth created for America's middle class."

And the elderly poor can either work till they die or beg on a street corner. Either option is equally good with greedy Republicans like Terry.

Whenever this topic comes up, people such as "the truth" (a misnomer if there ever was one) trot out the most horrible examples - Bear Stearns, Enron, etc. - as a reason not to do anything. That way lies paralysis.

Since "the truth" has brought it up, let's be clear about Bear Stearns. Bear Stearns is a banking, securities trading, and brokerage firm. The firm itself collapsed, and those who owned Bear Stearns stock are out a lot of money; the stock, as of the latest JPMorgan Chase offer, is worth about a third of what it was. To the extent, though, that Bear Stearns invested clients' money outside the firm, that money is still there, and that represents the bulk of the money handled by Bear Stearns.

Over the long term, and it's the long term we're talking about here, equities do better than almost any other investment. It's a shame that we can't find some way to tap that market to help out Social Security. "The truth" isn't making us free here.

Jones, Jones, Jones. The Democrats are on record as supporting increasing payroll taxes.
My point about the Queen B, which obviously escaped your limited abilities, was that Hillary has no solution to the Social Security crisis. She is against privitization of Social Security and she has said (whether true or not) that she will not raise Social Security taxes, cut benefits or increase the retirement age. So, if all those elements are off the table, according to her, what is her solution? More of the same?
In my post you comment on, I put forth my belief for handling the problem: letting us invest our SS money into a private account, much like we do with 401(k)s.
Got it Jones???

Now for "the truth." Amazingly, "the truth" has a couple of interesting points. Let's immediately remove the ridiculous taking over companies that hire illegals. Dumb, ineffective and doesn't solve anything.
Proposal Number 3 already is pretty much in effect, actually variations of that. I believe my retiremtn age isn't until I am 67, and more than likely will go up to 68-70 because the politicians will have to do something to buy more time.
the "truth" has two fives. The first says to lower the working age at many outlets such as retial and fast food to 15. Well, 16 year olds already can work. Lowering it one more year and with the hours and pay they get, that little bit of exta money will do nothing. But I do like the fact that you believe working teens benefit from the work and learn.
In regard to working seniors. Seniors already can work, and if they want to or have to, they should. To take money away from them as they work is wrong. As a typical liberal, you have the belief the money taken from them is the government's. The money we get back in effect is our money, taken from us as we work. Holding my money back because I choose to work in retirment is wrong-headed.
Also, in 1993, Clinton and Democratic Congress voted to INCREASE taxes on seniors who work -- whether they have to work or not. That vote was wrong then and still wrong today.

Why do DaveB, John D, and Terry continue to try and make us believe Social Security is a retirment savings plan. It is pooled risk insurance to protect workers from retiring in complete poverty and provide a benefit to those deemed totally disabled by the SSA. Terry and/or DaveB care to share how a young worker age 29 who becomes completely disabled is supposed to make it the rest of his life when he's only banked $16K in personalized Social Security Account? If you think he can get this personal account to stretch out for the remainder of his natural life, well then why would anyone work until they are in their 40s if they can retire on $16K invested in a personalized account?

How much of the problem is actually real and how much is just hype? Social Security should not be lumped into the discussion about Medicare and Medicaid. But one thing strikes me as odd when they are packaged as one entitlement program: the surplus that SS currently has, coupled with the IOUs that the general revenue has taken from previous year's surpluses and the elimination of the costly drug program that Mr. Bush said would save millions, would bring the program to almost even.

But I was thinking of another way. It is widely considered fact, that the recent actions of the Fed, stepping in before Bear Stearns could collapse is a good thing if, and this is a very big IF, they can hold the securities they guaranteed until maturity. Could this be a way to fund SS without buying Treasuries? Perhaps the surplus in SS could be used to secure mortgage backed securities and, if they held them long enough, would be highly profitable. The side effects of this are obvious to homeowners and the thinly traded securities would attain a value relative to the underlying security, the home that backs the loan.

Your thoughts?

John, that's what's called a "residual problem." Of course, any privatization plan, or partial privatization plan such as that proposed by GWB a few years ago, would have to address such problems, much as the Disability Insurance Benefits of Social Security address such problems today.

We shouldn't let the whole ship founder on the rocks of residual problems.

For all those die hards pointing out W's great plan for privatization that was squandered or whatever, I don't remember too many Republicans rallying around it in a meaningful way. Wasn't there a Republican majority back then?

kb, neither do I remember Republicans (or anybody else, for that matter) rallying around GWB's plan. It was DOA, and no real discussion of the problem ensued. Our elected representatives would rather discuss steroids in baseball than fixing a looming problem that will affect all of us.

It amazes me that there is one little story on this, but 15 on how Chelsea Clinton is reacting to a personal question, or how Barak Obama's pastor is causing controversey.

It's sad that we are so deluded that don't recognize the broken pieces right in front of us. We'd rather yell about who's better for us in the popularity contest for President.

Seniors, unfortunately someone is going to have to be the 'first one' when it comes to raising the qualification age. Perhaps a % can be given to someone 65 yrs of age, and then they can get the full coverage at 66 or 67. People are living longer.

People who don't need the Social Security should be able to opt out at a younger age. Why keep paying in and then taking it out if you make more than enough - I know it's not the American way - "I want what's coming to me!"

When the boomers start hitting the age where doctor's bills start breaking the bank, will they call for change to our system? I hope so. As someone who works within this broken system, it's sad to see. Contrary to what some may believe, we do enter into it to actually 'help' people.

The wrongful spending of our Social Security funds was first done when George Bush Sr. was in office to pay some of the interest on our national debt, this trend was continued with Bill Clinton and again with Bush Jr.


The reason you libs don't like privatization is that it would create wealth. Wealth would lessen dependency on the gov't and the libs would have no power base.


SS started as a risk insurance plan, but has turned into a retirement plan as many Americans don't save for retirment since they believe (wrongly) that SS will provide for their needs.

Even if it is a risk insurance plan, why is the gov't in the "risk insurance" businesss in the first place? Are they in the car insurance buisness? Home insurance?

Use your 1 in 1000 example of the 29 yr old worker that becomes permanently disabled, does that justify this program for the remaining 999. Is there a private insurance company that can do this work?


To answer you question on why this post is not as popular as Chelsea's handling of her dad's infidelity, it is becuase most people in here are liberals. Most liberals do not understand basic economics therefore, they will pass over this issue and gone on to things they do understand.

But the Dems just want more taxes and more spending, which is killing the U.S. economy.

Posted by: John D | March 25, 2008 4:55 PM

Geographically Ignorant Dumb Dumb Little Johnnie Dyslin, "the Joseph Stalin of Streamwood", wasting over $325 million a day for the past 5 years in Iraq while refusing to raise taxes to pay for it - the first time in US history when a president started a war and DIDN'T raise taxes to pay for it - is what's killing the US economy. Having CEOs make tens of millions of dollars while driving their companies into the ground as they ship jobs overseas - that's what's killing the American economy. Passing a $10 TRILLION IOU to US citizens in January 2009 is killing the economy.

"The Truth" points to one company that collapsed. Yet, he ignores Walgreens, McDonalds, GE, United Technologies, Visa, Google, Microsoft, and on and on and on -- companies that are are successful and grow.

Posted by: John D | March 25, 2008 11:47 PM

Geographically Ignorant Dumb Dumb Little Johnnie Dyslin, "the joseph Stalin of Streamwood", let's talk about these companies in addition to Bear Stearns:

United Airlines.
Northwest Airlines.
Washington Mutual.
JDS Uniphase.
Fifth Third Bank.

Defunct. Bankruptcies. Losing 50 - 75% (or more) stock value in the past 5 years. Many stocks in the S&P 500 have NO share price growth in the past 5 years. There's plenty of lousy American corporations that have failed their shareholders - like Microsoft, one that you mentioned.


Fishman’s Framework for Tax Reform, the tax reform plan that saves our middle class is now available to read free of charge at:

Los Angeles, CA – The publication of Fishman’s Framework for Tax Reform heralds the introduction of the tax reform plan that will save our middle class. This revolutionary tax reform plan lowers taxes for individuals and corporations yet raises almost $1 trillion more revenue than our current tax system. The additional revenue solves Social Security’s long term funding problem, creates and fully funds National Health Care and expands public education to include college, free of charge. It does all this and more while running a budget surplus.

Fishman’s Framework for Tax Reform is the most comprehensive economic growth and stimulus plan ever proposed. The tax plan itself is only 17 pages long and comes with 40 pages of commentary, specific tax revenue estimates and five year budget projections. Additionally, there are seven appendices that prove that his tax reform plan lowers taxes and funds all government programs while running a budget surplus.

Contact: Mark Fishman

Nothing is getting done about this because most of congress doesnt really care. All of the senators are millionaires. Just look at how much the 3 canidadates are putting into their own campaign funds. They think of themselves and their families first. Most of the earmarks they propose dont benefit anybody but themselves or their friends. Friends as in people that give them money to do as they say. Some senators just take office so they can make some money, they will do whatever the highest bidder tells them too. Thats why nothing is getting done to help out Social Security, its cause they dont need it. The candidates only want change so bad so they can get our votes but then do nohting. Alot of the things in the Government need to change before any changes can get made for this country. If people dont wise up a bit and start doing someting about it, It will never Happen.

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