Contrary to what many believe, the US federal government does not spend the bulk of its revenue on its military. Or even on politicians’ hefty paycheques.
Instead, almost 45% of taxpayer dollars go to support Medicare, Social Security and disability benefits to the tune of $2.43 trillion (US$1.74 trillion) per year. But in a sign of what happens when governments overpromise retirement welfare benefits Medicare could be insolvent within six years.
On Monday a report was released by the government’s overseers of Medicare and Social Security, which revealed the programs are becoming more financially unstable every year.
As AP reports, Social Security would become insolvent in 2035, one year later than previously estimated. And both programs will need to eventually be addressed to avert automatic cuts should their trust funds run dry.
The Trump administration report has warned that the often life-saving benefits provided by both services could be no longer. In Medicare’s case, that means that nursing homes and hospitals would only be paid with part of the fees they were promised. And the insolvency of Social Security could result in funds being immediately cut to millions of retirees who depend on them.
As Reason Magazine reports, at the end of 2018 the Social Security program was providing income for 67 million Americans — 20 million of whom are disabled. And although the program’s disability funding is estimated to remain solvent until 2050, the outlook remains grim for pensioners all over the nation.
Medicare a difficult problem to solve
Many on both sides of politics, along with the recommendations stated within the report, agree that the government should address the problem sooner rather than later, even though it can often be political suicide to tamper with government benefits.
Despite this, Trump has declared that there will be no cuts to the nation’s signature retirement programs, while many Democratic presidential candidates continue to argue that expanding Medicare benefits is the way to go, regardless of the dwindling finances.
As AP reports, it’s extremely difficult to solve the problem of Medicare funding as healthcare costs often surpass economic growth. As such, it would take a payroll tax increase of 0.9% to fully address Medicare’s shortfall or a 19% cut in spending.
In the midst of all this, Treasury Secretary Steven Mnuchin is remaining positive, stating:
‘We remain committed to further bolstering the programs’ finances, which will benefit from the long-term growth we will see as a result of the Administration’s economic policies.’
So far, President Trump has not spoken of any cost curbs to the program. However if Congress doesn’t address the problem soon, the programs will not be able to cover the cost of the benefits that were promised.
So, although ignoring the problem seems like the easy way out now, come 2035 there may be many unhappy Americans banging on Trump’s door.
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