As Congress considers wrecking the economy through health care “reform” and anti-energy “cap and trade,” it is worth remembering the even bigger fiscal problem looming in the future: Medicare and Social Security. They threaten to overwhelm us with $107 trillion in unfunded liabilities.
The 2009 Social Security and Medicare Trustees Reports show the combined unfunded liability of these two programs has reached nearly $107 trillion in today’s dollars! That is about seven times the size of the U.S. economy and 10 times the size of the outstanding national debt.
The unfunded liability is the difference between the benefits that have been promised to current and future retirees and what will be collected in dedicated taxes and Medicare premiums. Last year alone, this debt rose by $5 trillion. If no other reform is enacted, this funding gap can only be closed in future years by substantial tax increases, large benefit cuts or both.
Social Security versus Medicare. Politicians and the media focus on Social Security’s financial health, but Medicare’s future liabilities are far more ominous, at more than $89 trillion. Medicare’s total unfunded liability is more than five times larger than that of Social Security. In fact, the new Medicare prescription drug benefit enacted in 2006 (Part D) alone adds some $17 trillion to the projected Medicare shortfall – an amount greater than all of Social Security’s unfunded obligations.
Instead of coming up with ways to spend even more money while cutting or even eliminating economic growth, legislators should be dealing with this looming financial disaster.