WASHINGTON—A new report contains blunt warning signs of an approaching fiscal crisis in federal trust funds backing Social Security, Medicare, flood insurance, and many other programs, according to Senate Budget Committee Chairman Mike Enzi (R-Wyo.).
“The GAO’s new report is another warning sign that Social Security, Medicare, and other trust fund programs on which many Americans rely are in danger of going broke,” Enzi said Jan. 23 in releasing the Government Accounting Office (GAO) analysis.
“Congress will need to work in a bipartisan manner to safeguard these programs to ensure they are able to provide for those who need them now, and in the future,” Enzi said in a statement accompanying the release.
Enzi and budget panel member Sen. Mike Braun (R-Ind.) requested the report, which took more than a year to complete.
Braun said the report highlights the need for political leaders to confront the trust fund problem without further delays.
“The nation is $23 trillion in debt and is now running trillion-dollar deficits,” Braun said in the statement. “Congress needs to come together and make tough decisions to preserve these trust fund programs that so many Americans depend on for their way of life—for today and for generations to come.”
The collective total for all federal trust fund balances increased between fiscal years 2014 and 2018, according to Enzi and Braun, but that balance will begin declining in 2022, with decreases in Social Security and the Medicare Hospital Insurance funds leading the way.
A senior Senate Republican aide, speaking on background on Jan. 24, told The Epoch Times that the crucial message from the GAO analysis is that “while every major federal department has trust funds, many of them are not fully supported by dedicated revenues and are in danger of becoming insolvent in the near future.”
The aide pointed to examples in the GAO report of the most seriously deficient trust funds, including:
- By 2022, the federal Highway Trust Fund will be so depleted that its income will be insufficient to meet projected obligations for infrastructure repairs and construction.
- By 2025, the Pension Benefit Guarantee Corporation (PBGC) multi-employer trust fund is rapidly depleting and will not be able to pay full benefits in plans that go insolvent.
- By 2026, the Medicare Hospital Insurance Trust Fund will be so depleted that its income will only be sufficient to pay 89 percent of scheduled benefits.
- By 2034, the Social Security Old-Age and Survivors Insurance (OASI) trust fund will be so depleted that its income will only fund 77 percent of scheduled benefits.
When such trust funds’ income and assets aren’t big enough to pay promised benefits, Congress has few options: appropriate tax dollars from the government’s general revenues to cover the difference, which may require reduced spending in other areas such as national defense; decrease the promised payments, or increase federal levies on individuals and corporations.
In addition, many of the federal trust funds are linked to programs that legally entitle recipients to the benefits, thus potentially prompting an explosion of litigation in legal challenges to congressional actions to lower payments.
“Of the 23 largest trust funds and other dedicated funds we reviewed, 13 have entitlement authority, which legally requires payments to individuals or governments that meet the requirements of the programs,” GAO stated in its report.
“For example, OASI beneficiaries are legally entitled to benefits based on a formula that takes into account the time they spent working and their earnings, among other factors.
“Program sustainability is ultimately determined by whether the government as a whole has the economic capacity to finance the claims on the trust funds at the cost of other competing priorities,” GAO stated.
The report noted that “hundreds of programs across the federal government are supported in whole or in part by a trust fund or other dedicated fund.” A total of 398 such trust funds were identified by GAO across the federal government.
But the problems underlying the trust fund crisis are even more basic than insufficient assets to cover promised payments, according to a spokesman for a Chicago-based group that is highly critical of federal accounting practices.
“Consider how the GAO report discusses the spending in these categories using the commonly-accepted term, ‘mandatory spending,’” Truth in Accounting (TIA) Research Director Bill Bergman told The Epoch Times on Jan. 24.
“Yet the reasons the government has given for not including these unfunded obligations as debts on the balance sheet include an argument that government controls the law and can change the law at any time. If that is true, why do they call it mandatory spending?” Bergman asked.
“Another labeling mechanism greasing the wheels for our kick-the-can-down-the-road approach to these programs has been the simple fact that they are called ‘Trust Funds,’ even though they aren’t trusts, and don’t have any funds in them. At least the report puts ‘trust funds’ in quotes, and acknowledges they are really accounting mechanisms,” he said.
Such practices, he added, “have helped to anesthetize the public and our representatives in Washington.”
Contact Mark Tapscott at Mark.Tapscott@epochtimes.nyc