Last time I talked about how the Social Security program has nothing to show for trillions of dollars of past profits, and uses crony accounting to show profits for its program by including mythical interest on non-existent assets. This time we'll see that how the losses for the Social Security, Medicaid and Medicare programs are sharply increasing and spending on these programs is growing faster than the rest of government. Except for the nearly unthinkable scenario in which Social Security and Medicare (and Medicaid) benefits are substantially reduced, these programs will continue to crowd out the rest of the government, including the military. This is already happening as the “non-discretionary” programs of Social Security, Medicare and Medicaid are untouchable to government reductions, leaving just a small and shrinking slice of government spending with which to make spending cuts. Ironically, this will speed the process whereby these social welfare and insurance programs take over and become the U.S. federal government.
The recently released 2018 Social Security and Medicare Trustees Report outlined the continuing deterioration and vulnerability of the Social Security and Medicare programs and their future in America. The Trustees reports now projects that Social Security “Trust Funds” will be depleted by 2034, and that Medicare's Hospital Trust Fund will be depleted in just eight years, three years earlier than anticipated just a year ago. And as with all of their recent annual reports the trustees call for Congress and lawmakers to work to address the problems that have been building for decades. Unfortunately, the idea that another decade or two might pass before Social Security and Medicare is in trouble continues to provide excuses for lawmakers to do nothing to limit the damage to future government budgets, taxpayers and the economy. Among many politicians and within the general population, the false idea that Social Security has a trust fund to pay for future losses grossly distorts the true picture of how the Social Security program operates and how it unwisely spent its profits during economic boom times.
David A. Pace, CFA
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