Reality: Social Security/Medicare is fine, and can be even better. If we choose to

Earlier this week, we received the annual Social Security and Medicare Trustees report. This report is always worth following, as it gives the future projections for 2 programs that a whole lot of Americans count on.

But that was especially true after the craziness of 2020, with a record number of deaths and a major loss of jobs, and the Trustees' report says that caused some changes in the outlook.

The data and projections presented include the Trustees’ best estimates of the effects of the COVID-19 pandemic and the 2020 recession, which were not reflected in last year’s reports. The finances of both programs have been significantly affected by the pandemic and the recession of 2020. Employment, earnings, interest rates, and GDP dropped substantially in the second calendar quarter of 2020 and are assumed to rise gradually thereafter toward full recovery by 2023, with the level of worker productivity and thus GDP assumed to be permanently lowered by 1 percent even as they are projected to resume their pre-pandemic trajectories. In addition, the Trustees also project elevated mortality rates related to the pandemic through 2023 (15 percent for those over age 15 in 2021, declining to 1 percent by 2023) as well as reductions in immigration and childbearing in 2021-22 from the levels projected in the 2020 reports, with compensating increases a few years later. These alterations to near-term data and assumptions all significantly impact the outlook of the programs.

The upshot of this is that Social Security – which is actually the 2 programs of Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) – isn’t going to be able to pay for all its benefits on its own in the year I turn 60.

• The OASI and DI funds are separate entities under law. The report also presents information that combines the reserves of these two funds in order to illustrate the actuarial status of the Social Security program as a whole. The hypothetical combined OASI and DI funds would be able to pay scheduled benefits on a timely basis until 2034, one year earlier than reported last year. At that time, the combined funds’ reserves will become depleted and continuing tax income will be sufficient to pay 78 percent of scheduled benefits.

This led to ineivtable headlines and stories in corporate media that went like this.

The Social Security Old-Age and Survivors Insurance Trust Fund will now be depleted in 2033, a year earlier than previously projected, according to the report. At that time, the trust fund will run out of reserves and the program will be insolvent, with new tax revenues failing to cover scheduled payments. The report estimated that 76 percent of scheduled benefits will be able to be paid out unless Congress changes the rules to allow full payouts.

Well if the New York Times says Social Security will be "insolvent" in 12 years (well, 13 if you combine it with Disability), then PANIC!!!

Except no government program is "insolvent", and especially not Social Security. If the Social Security Trust Funds don’t pay for themselves, then benefits can still be paid for in the same way we pay for a lot of other items from Washington these days – by borrowing for them. Or we can avoid by borrowing by making the rich pay the same percentage of their payroll as most of us pay (because there is no Social Security payroll tax after someone reaches $142,800 of earnings). Or a number of other fixes.

On the Medicare side, one part is going to need to start borrowing in 5 years, but other areas have no problems paying out benefits whatsoever.

• The Hospital Insurance (HI) Trust Fund, or Medicare Part A, which helps pay for services such as inpatient hospital care, will be able to pay scheduled benefits until 2026, the same year as reported last year. At that time, the fund’s reserves will become depleted and continuing total program income will be sufficient to pay 91 percent of total scheduled benefits.

• The Supplemental Medical Insurance (SMI) Trust Fund has two accounts: Part B, which helps pay for services such as physician and outpatient hospital care, and Part D, which covers prescription drug benefits. SMI is adequately financed into the indefinite future because current law provides financing from general revenues and beneficiary premiums each year to meet the next year’s expected costs. Due to these funding provisions and the rapid growth of its costs, SMI will place steadily increasing demands on both taxpayers and beneficiaries.

If you drill down into 2020 in particular, you will see that both “regular” Social Security and Disability were almost dead-even between money coming in and money going out. But Hospital Insurance had a $60 billion deficit, while Medicare Parts B and D ended with a solid $34.8 billion surplus.

As the chart above showed, the growth of the Trust Fund hasn't been keeping up with the increases in cost for Social Security since 2010. But the Trustees go on to say that 2021 is now slated to be the first year where Social Security will spend more in benefits than in makes in its various sources of income, which means the total amount of reserves will start to fall from its current level of $2.9 trillion.

But make no mistake, there is no “crisis” in funding for Social Security or Medicare. These programs can continue to pay for its current benefits and even pay for more services or serve more people if we choose to. As the current Chair of the Senate Budget Committee reminds us in a clip that may be a decade old, but is still as relevant as ever.

Indeed, one of the big items that the “big infrastructure” bill that Bernie is talking up these days allows Medicare to cover dental, vision and hearing services for seniors. All it takes is a small tax increase on the rich and/or corporate, either through payroll taxes or regular income taxes, and these needs and many others can be taken care of.

We also could use the savings from other programs that are being phased down and/or out in the coming years. After all, do we really need $700 billion+ a year going to our Defense Department if we’re (rightfully) going to get out of the business of nation-building in foreign lands?

These popular, common-sense solutions to the funding “issues” for Social Security and Medicare is likely why there is a massive lobbying effort going on by the US Chamber of Commerce and other oligarchs organizations to try to keep that from happening. Because the last thing those greedheads want is for Americans to have financial security and not have to be beholden to lousy jobs with bad benefits and little pay.

But after the last year, where we saw how COVID relief kept us from falling into a massive depression despite record unemployment, and how people realized that they didn’t have to settle for poverty wages and a substandard quality of life, I’m not thinking that Koched-up talking points about cutting Social Security/Medicare are going to be accepted by many voters. And saving or (even better) beefing up Social Security and Medicare should be a central line of attack by Dems against Koched-up GOPs going into 2022.