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May 24

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Social Security & Medicare Remain a Mess

Each year, the trustees of the Social Security Administration prepare a report on its programs. The 2011 report was released last week.

The summary report starts out:

The financial conditions of the Social Security and Medicare programs remain challenging. Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative modifications if disruptive consequences for beneficiaries and taxpayers are to be avoided.

The long-run financial challenges facing Social Security and Medicare should be addressed soon. If action is taken sooner rather than later, more options and more time will be available to phase in changes so that those affected have adequate time to prepare. Earlier action will also afford elected officials with a greater opportunity to minimize adverse impacts on vulnerable populations, including lower-income workers and those who are already substantially dependent on program benefits.”

According to the report, absent program changes, the Social Security funds are exhausted in 2036, one year earlier than it predicted just last year. The Medicare funds are exhausted in 2024.

Annoyance arises every time I hear the Social Security and Medicare mess referred to as a trust. The name of the report and those making the report (i.e., references to a “Trust” and “Trustees”) perpetuates the fraud that there are actually assets set aside to meet these obligations. The reality is that the government has taken (and continues to take) the payroll contributions that were paid in trust, and used the moneys for something else. Any real trustee of a real trust would be sued if moneys paid in trust were handled as this “trust” routinely has done.

About the author

David Nolte

I am a founding principal of Fulcrum Inquiry, an accounting and economic consulting firm that performs damage analysis for commercial litigation, forensic accountings, financial investigations, and business valuations. I am a Certified Public Accountant (CPA) and an Accredited Senior Appraiser (ASA), as well as having other professional credentials. I regularly serve as an expert witness involving damages measurement. My litigation-oriented resume is on Fulcrum's website.

Permanent link to this article: http://betweenthenumbers.net/2011/05/social-security-medicare-remain-a-mess/

4 comments

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