Minehan, Cathy
By 2030, almost one in five U.S. residents will be 65 years or older. Well before then, beginning in about 2018, Social Security will start to pay out more in benefits than it receives from payroll taxes. Even before that, -- in the neighborhood of 2010 -- Social Security will start exerting upward pressure on the unified federal budget deficit as its surplus diminishes, with a consequent reduction in net public saving, absent changes in the program itself, increased taxes, or reduced spending on other government programs.
The situation for Medicare is similar and, potentially even more serious. Payroll taxes to cover Medicare expenditures are currently in surplus. Over time, however, Medicare spending is expected to increase more rapidly than related tax revenues, creating a deficit problem that analysts see as potentially greater in size and more difficult to deal with than that associated with Social Security. Thus, despite the relatively benign federal deficit we currently see, it is clear the situation will worsen dramatically over the next decade. And, unlike the late '80s when deficits became a national concern, there seems to be no political consensus on the nature of this problem or its resolution -- a fact that should be a concern to all of us.