The costs of the nations Social Security and Medicare programs continue to be unsustainable under current financing arrangements, said trustees of both programs in a report issued today.
Without reforms, cash flows for Social Security will turn negative in fewer than 10 years, meaning the U.S. will have to draw on general revenue to support withdrawals from the Social Security trust funds to pay current benefits, said Treasury Secretary Henry M. Paulson Jr. at a press briefing today. Trust funds for the Social Security program are expected to be exhausted by 2041. Social Securitys unfunded obligation equals $4.3 trillion over the next 75 years and $13.6 trillion on a permanent basis.
To make the system whole on a permanent basis, the combined payroll tax rate would have to be raised immediately by 26% (from 12.4% to about 15.6%), or benefits reduced immediately by 20%, Mr. Paulson said. The sooner we take action to strengthen Social Securitys financial footing, the less drastic the needed reforms will be and the fairer reforms will be to future generations.