The Social Security and Medicare Board of Trustees issued a report giving the grim news that both programs will go broke five years earlier than previously projected. Medicare will be tapped out by 2024 and Social Security by 2036. In fiscal year 2010, Social Security had a $49 billion dollar deficit, the first deficit since 1983, and is expected to have at least a $46 billion dollar deficit in the current 2011 fiscal year. They predict that the deficits will decline to about $20 billion annually, should the economy rebound. But by 2014, the deficits will rise again, recovery or no recovery, due to the increase in the numbers of new beneficiaries. Through 2022, these deficits will have to be made up for by redeeming trust fund assets with the Treasury, but after 2022, even that source will dry up.

social security broke

What are these “trust fund assets”? For many years, when Social Security ran surpluses, the Federal government borrowed from the trust fund, exchanging non-negotiable Treasury bonds for cash. Unlike negotiable bonds, these cannot be sold off to just anyone. Only the Treasury, meaning us taxpayers, can buy them back. Not exactly a good situation considering how massive our current spending and debt levels are.

Medicare is in even worse shape. Medicare has been running deficits already since 2008. This year the program will have a shortfall of about $48 billion dollars. Now, the Obama administration likes to tell us that once their Affordable Health Care Act is fully implemented, that Medicare costs will decline by as much as 30% of projected estimates. Given that not one single budgetary prediction from the Obama administration has yet to be true, such as how the Stimulus program of 2009 would prevent unemployment from exceeding 8%, I would call such optimism dubious at best.

The grim realities are that the welfare state begun by FDR, and reinforced by LBJ and others, are pushing America off the economic cliff. This latest report the trustees of Social Security and Medicare on how both programs will go broke sooner than previously expected is no surprise to those of us who adhere to the Austrian School of Economics. Social Security was a Ponzi scheme from its very beginning. Medicare is just a pure welfare program. Both have drained the economy to the breaking point and the Day of Reckoning is approaching quicker than the Keynesians expected. Frankly, I would not be surprised if both programs go broke even sooner. Welcome to the New Reality of the Obama Era. You may recall in other economic stories where I have before voiced the opinion that the true nature of our woes is probably far worse than even this grim news.

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Social Security And Medicare In Even Worse Shape Than Previously Thought