Social Security now has an unfunded liability of $10.4 trillion. With 2004’s figures, theannual cost of Social Security benefits now represents 4.3% of Gross Domestic Product (GDP) and is projected to rise to 6.6% of GDP in 2078 , according to the 2004 reading of the Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds prepared by theSocial Security and Medicare Trustees.
Although the insolvency date remained the same, shifted down was theprojected 75-year actuarial deficit in the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) Trust Funds which is 1.89% of taxable payroll, down slightly from 1.92% in last year’s report.
The Trustees offer ways Social Security can be brought into actuarial balance over the next 75 years. This includes either an immediate increase in payroll taxes of 15%, an immediate reduction in benefits of 13% or some combination of the two. Yet this would only sustain the system until 2078; to sustain past that time would require even greater changes.
However, only getting worse was Medicare’s unfunded liability, which now stands six-times greater than Social Security’s at $61.6 trillion; accounting for $16.6 trillion of that figure is the prescription drug benefit. That unfunded liability now means Medicare will run dry by 2019, earlier than the 2026 projected just last year. Overall, t he projected 75-year actuarial deficit in the Hospital Insurance (HI) Trust Fund is now 3.12% of taxable payroll, up from 2.40% in last year’s report. This is being attributed mainly to higher actual and projected hospital expenditures, as well as lower actual and projected taxable payroll, and new Medicare legislation. To correct this dire situation, the Trustee sayHI could be brought into actuarial balance over the next 75 years by an immediate 108% increase in program income, an immediate 48% reduction in program outlays or some combination of the two.
In total, the long-term deficits in Social Security and Medicare total $72 trillion, nearly seven times the size of the U.S. economy.
A copy of the full report can be found at http://www.ssa.gov/OACT/TR/TR04/ .