The total costs of Social Security will exceed total income this year for the first time since 1982, according to the annual Social Security and Medicare trustees report released on Tuesday, as funds for Medicare are expected to run dry earlier than expected.
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While costs have exceeded net income since 2010, this is the first time in more than three decades that spending is expected to outweigh total income, by about $2 billion, meaning asset reserves will decline. Asset reserves as of 2017 were $2.9 trillion.
The trustees forecast that 100% of benefits will be covered through 2034, after which the trust funds for Social Security, which also cover old age and disability insurance programs, will only be able to cover about 79% of benefits.
Meanwhile, Medicare’s hospital insurance trust fund is expected to run dry in 2026, three years earlier than what the trustees had predicted in last year’s report. At that time, funds will be sufficient to cover just 91% of Medicare Part A costs.
Challenges for both programs are exacerbated by the aging of the baby boomer population, without an equivalent proportion of workers available to replace them in the workforce.
Despite looming shortfalls, U.S. Treasury Secretary Steven Mnuchin said accelerated economic growth under the current administration would help to bolster both programs’ coffers in the coming years.
“The administration’s economic agenda – tax cuts, regulatory reform, and improved trade agreements – will generate the long-term growth needed to help secure these programs and lead them to a more stable path,” Mnuchin said in a statement on Tuesday.
Sixty-two million people, including 45 million retired workers, were receiving OASDI benefits at the end of 2017. Social Security and Medicare account for 42% of all federal spending.