How are we going to fix those trust funds?

Here is what should be part of the president’s next budget. These are things very important to most Americans.

Trust Fund Solutions for Social Security, Medicare, and the Highway Trust Fund: Under current law, the Medicare Hospital Insurance trust fund will be insolvent by 2026, the Highway Trust Fund by 2027, the Social Security Old-Age and Survivors Insurance trust fund by 2033, and the Social Security Disability Insurance trust fund by 2057. These trust funds face combined cash deficits of $3.5 trillion over the next decade. To secure the health of our major trust funds, the President’s budget should put forward trust fund solutions to lower Medicare costs, slow the growth of Social Security, raise additional revenue for those programs, and close the highway trust fund shortfall. Thoughtful solutions would not only prevent abrupt across-the-board cuts upon insolvency, but also improve the programs themselves, accelerate economic growth, and improve our long-term fiscal outlook.

Committee for a Responsible Federal Budget

Given Congress’s track record dealing with these trusts, there is not much hope. The trusts need more revenue, less spending or a combination of both, but nobody wants to explain that to us.

6 comments

  1. See writeup at AEI by Mark Warshawsky regarding Social Security solvency.

    Hello Mark. Thanks for the writeup on reforming Social Security.

    I believe the funding challenge can be successfully resolved with three changes:
    – Freeze and maintain the existing Social Security system – benefits, taxes, etc.,
    – Change the existing system from an entitlement to a contract basis, and
    – Give individual taxpayers and beneficiaries an annual choice on how they want to fill the funding gap – increased taxes, reductions in benefits (but not below certain thresholds) or a combination of the two (loaded for anti-selection and repriced annually)

    In pricing the choices, public and private sector actuaries would be called upon to certify that the current “social” transfers (the progressivity built into the system) are maintained and that the program is inter-generationally sustainable for the current year, at 5 years, 10 years, 25, 50 and 75 years and indefinitely (based on current populations, mortality, etc.)

    If Congress wants to do more, they can pass separate legislation.

    Happy to discuss. But, no proposal will gain wide acceptance by taxpayers AND beneficiaries unless the authority to promise more to buy votes is taken away from Congress, unless the people get to choose their own solution, and unless the benefit is no longer an entitlement but a contractual right – at least with respect to a return of the worker’s own contributions (thoughout retirement, to a surviving spouse and/or minor children).

    Liked by 1 person

  2. Georgia has suspended gas tax collection until the end of may but that doesn’t affect fed tax collections.
    As for the broad brush ideas of lowering the growth rate of SSA and Medicare, good luck. Easy to say not easy to do. The trust funds aren’t the heart of the matter, a surplus that increases the trust funds only means excess collections for that year and ongoing surplus collections going into a fund just means the fund excess becomes a cash cow for other non related spending. Cash in and cash out is what matters on an annual basis.
    Calibrating spending in and out on these programs and keeping everyone on the same page as to what is needed to run a fair program is monumental and I don’t hold my breath that a solution is near.

    Liked by 1 person

    1. I don’t know how it works in Georgia, but in New Jersey, fuel taxes collected at the pump go to the NJ Highway Trust fund. It got so bad that they passed a law that if the fund didn’t a certain amount in it, taxes automatically had to be raised to protect the bond ratings. If the amount was too high, taxes are lowered. This was to ensure that NJ had the matching funds to the federal dollars to complete highway projects and pay the bonds. The politicians were talking about suspending the fuel tax here too. Haven’t heard much on that lately once it was pointed out that the law automatically adjusts the tax rate and any tax holiday and resulting shortfall will cause an even bigger tax hike in October.

      Liked by 1 person

      1. Georgia doesn’t have an automatic adjustment on fuel tax rates so the process was simpler. The amount not collected by the state will be made up by using part of the surplus from last years budget and dipping into the rainy day fund if necessary.

        Liked by 1 person

  3. Well it appears that as far as the highway trust fund, it had been proposed at the federal level and actually done at the state level in some states to stop collecting fuel taxes due to high fuel prices. No tax collections to deposit into the highway trust fund will just make the problem worse. The is our current politicans knowledge about budgets and economics.

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