Social Security and Medicare trust funds are in dire financial condition due to rising benefit costs, but the biggest problem facing the two largest federal entitlement programs is how they’re funded, according to a nonprofit that advocates greater government transparency and accountability.
Weinberg was referring to the fact that the trust funds receive what are in effect IOUs from the Treasury Department that are called “securities”—promises to pay a specified amount at a future date.
On Social Security, for example, the government pays interest on the securities, generally about 2 percent, and the total value of the securities is presently just less than $3 trillion. Securities are paid out of general revenues when they come due.
“We would also highlight the massive underfunding. Social Security is underfunded by $40 trillion, Medicare by $55 trillion. This represents the amount of money the government has promised in benefits, and they have no idea where they are going to get the money to pay for those promises,” Weinberg said.
The official U.S. national debt is $29 trillion, but Weinberg’s group maintains that the true amount is more than $133 trillion when the costs of benefits such as those promised by Social Security and Medicare are included in the calculation, according to the Chicago-based TIA.
Private sector pension plans are required by federal law to account for future benefits and to properly fund them. But the federal government doesn’t follow the same law for its own pensions.
Medicare has the largest unfunded benefits total at $55 trillion, followed by Social Security at $40 trillion, and government employee and retiree pensions such as the Civil Service Retirement System (CSRS) at $9 trillion. The official public debt and assorted other federal liabilities such as loan guarantees make up the balance.
Trustee reports made public earlier this week show that the Medicare trust fund that pays for hospitalization is due to reach insolvency in 2026, while the Social Security trust fund will reach that point in 2033, barring major reforms in how the two programs are funded and pay benefits.
Weinberg is far from alone in pointing to the unfunded debts of Social Security and Medicare.
“Yesterday’s reports on the financial status of various Medicare and Social Security trust funds once again identify unsustainable benefit promises in Medicare and Social Security programs,” Sen. Mike Crapo (R-Idaho) said in a statement on Sept. 1.
“The Hospital Insurance trust fund is projected to be exhausted around 2026; there are $60 trillion of unfunded liabilities in Social Security programs; and unfunded liabilities increased by trillions of dollars over the last year alone.”
Differences in unfunded liabilities calculations are typically due to differences in the number of years covered, how future benefits are estimated, and differences in demographic assumptions.
“While bipartisan efforts are necessary to make needed changes to address Medicare and Social Security long-term financial challenges, most Democrats want only to expand benefit promises further without generating sustainable trust fund solvency,” Crapo said.
“I agree with the report’s recommendation that ‘Congress and the executive branch work closely together with a sense of urgency to address these challenges,’ and urge bipartisanship and cooperation to do so.”
Crapo is the ranking minority member of the Senate Finance Committee, which would be a major player in any congressional or presidential initiative to reform the Social Security and Medicare trust funds.
President Joe Biden hasn’t offered any proposals to reform the funding underlying either Social Security or Medicare.
Congressional correspondent Mark Tapscott may be contacted at email@example.com. Follow him on Twitter at @mtapscott and on Parler at @Mtapscott.
Correction: On Sept. 4 the quote from David Walker in the second paragraph was corrected.