Security Security’s reserve fund depletion by 2035 may impact consumers with a major tax increase, according to MarketWatch columnist Brett Arends.
“At or around 2034, you're either going to have to cut social security benefits very sharply or you're going to have raised taxes to basically keep benefits as they were," he told FOX Business’ Neil Cavuto on Tuesday.
Arends said the shortfall could have implications on future elections with certain people on Social Security or nearing retirement making up the majority of the voting population.
“The population is getting older, older people vote more...I don't think anyone is going to be able to run for office on a promise to cut people's social security when so many people depend on it,” he said.
Social Security and Medicare currently account for 45 percent of federal spending in the United States. Economists have also projected that the cost of the entitlement programs is estimated to be nearly 8.7 percent of GDP in 2019.
Arends said one of the ironies he sees is that if the entitlement programs was modeled after sovereign wealth programs in Europe, the U.S. wouldn't be facing an entitlement crisis.
"If we had invested the Social Security trust fund in a global index of equities, essentially the trust fund would be massively in surplus," he said.
According to the new report, the cost of Social Security will exceed its income in 2020 for the first time since 1982. Meanwhile, Medicare’s hospital insurance fund is expected to be tapped out in 2026. At that point, doctors, hospitals and nursing homes would not receive full compensation from the program and patients could face more of the financial burden.