Budget

Busters

Empire in Decline? 

Medicare’s Trust Fund Is Set to Run Out in 8 Years. Social Security, 16.

The Medicare trust fund will be depleted in 2026, the administration said. By contrast, the government said last year that the trust fund would be exhausted in 2029. 

In a companion report, federal officials said the Social Security Trust Funds for old-age benefits and disability insurance, taken together, could be depleted in 2034, the same year projected in last year’s report. The fund that helps tens of millions of retirees is expected to be depleted a year earlier than projected last year, while the outlook for the disability trust fund is more favorable. 

 “The current trajectories in health spending are both unsustainable and unmatched by increases in quality,” Alex M. Azar II, the secretary of health and human services and a trustee of Medicare and Social Security, said on Tuesday. 

A major reason for Social Security’s long-term financial problems is a decline in the number of workers for each beneficiary. 

In 1960, there were about five workers for every Social Security beneficiary. The ratio of workers to beneficiaries fell to 3.3 in 2005 and then to 2.8 in 2016. It will decline further to about 2.2 by 2035, when most baby boomers will have retired, officials said. 

The aging of the population is another factor in the growth of the two entitlement programs. The number of Medicare beneficiaries is expected to surge to 87 million in 2040, from 60 million this year, according to Medicare actuaries. And the number of people on Social Security is expected to climb to 90 million, from 62 million, in the same period.

DYI:  The trust funds that are nothing more than IOU’s between government agencies in this case Social Security/Medicare/Medicaid and the Treasury Department.  Medicare will run out in 8 years requiring a 76% decline in benefits to maintain this as a stand alone program if Congress does not intervene.  The same can be said of Social Security slated to run out of trust funds in the year 2034 requiring a 21% decline in benefits to put this program back into balance if Congress does not intervene.

 

These projections do not take into the very real possibility of recessions/depressions that would clip a few years off of these projections.  With a recession possibility coming in 2019 trust fund depletion could easily be clip by two or three years making the day of reckoning especially for Medicare/Medicaid within five years the new political hot potatoes. 

So far no sitting President will enforce 100 year old laws – Robinson/Patman, Clayton, and Sherman Anti Trust acts – to reign in the medical industrial complex that colludes to price fix and now moving from local to regional monopolies.  This industry pumps out more campaign money than the military industrial complex that is clearly the impediment to any reform.  Add on Social Security trust funds realistically running out in 2028 [DYI’s estimate] these two massive programs colliding with the military industrial complex.

Simply put if zero reform arrives official budget deficits will soar by 750 to 1,000 billion per year!  This will be bye bye to world domination by the U.S. military as U.S. Federal debt will come into question – dropping quickly to single A [possibly BBB] status by Standard & Poors – jacking up interest rates as investors demand compensation for the new perceived risk thus ballooning deficits ever higher for another round of ever higher rates compensating the never ending increased risk of default by inflation.

In the short term DYI’s forecast is first a deflationary smash as these programs funding problems come into focus along with massive corporate debt that will be defaulting during the next economic downturn.  Interest rates will drop significantly with the likely hood with Treasury notes of 5 years or less going negative.  Unless reform is forthcoming markets for our government debt will come into question thus moving rates up all during an economic downturn that could easily move from recession to depression as politicians crank up the money creation – thus inflating off – government liabilities.

DYI