In a New York Times post, Bruce Bartlett cuts through the confusion and explains Social Security and Medicare in terms of the budget:
What really matters for the viability of both Social Security and Medicare is their aggregate costs relative to the economy’s ability to pay them….
Thus we see that Social Security and Medicare are underfunded relative to promised benefits by $56.4 trillion or 3.8 percent of G.D.P. per year forever. To put these programs on a sound footing, federal income taxes would have to rise from 6.2 percent of G.D.P. to 10 percent, an increase of 61 percent.
In other words, whatever amount you paid on your federal income tax return this year would need to be 61 percent more, now and forever, to pay all the Social Security and Medicare benefits that have been promised over and above the payroll tax.
The only thing to note is that income tax revenue equal to 6.2 percent of GDP is low, by historical averages. Because of the recession, fewer people are working and income growth is down, generating less income tax revenue. That being said, $56.4 trillion is a lot.
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