The Government’s Best Kept Secret: The Unfunded Liability

Social Security and Medicare Projections: 2009

Brief Analyses | Social Security liaibility

No. 662                                                         

Thursday, June 11, 2009

by Pamela Villarreal

It’s quite interesting that we hear both administrations talk about the deficit that currently is around $12 trillion. Do you suppose if the sheeple actually understood what a mess big government has made and how it will eventually destroy our entire economy we might wake up and have MA de ja vu in every state in the union?  Below are the numbers in a read that should be our second wake up call.  Clean house on both sides for those who won’t support massive cuts in government (our money) spending, Random thoughts while observing the passing parade, J.C.

The 2009 Social Security and Medicare Trustees Reports show the combined unfunded liability of these two programs has reached nearly $107 trillion in today’s dollars!  That is about seven times the size of the U.S. economy and 10 times the size of the outstanding national debt.

The unfunded liability is the difference between the benefits that have been promised to current and future retirees and what will be collected in dedicated taxes and Medicare premiums.  Last year alone, this debt rose by $5 trillion.  If no other reform is enacted, this funding gap can only be closed in future years by substantial tax increases, large benefit cuts or both.

Social Security versus Medicare.  Politi­cians and the media focus on Social Security’s financial health, but Medicare’s future liabilities are far more ominous, at more than $89 trillion. Medicare’s total unfunded liability is more than five times larger than that of Social Security.   In fact, the new Medicare prescription drug benefit enacted in 2006 (Part D) alone adds some $17 trillion to the projected Medicare shortfall – an amount greater than all of Social Security’s unfunded obligations.

Future Payroll Tax Burdens. Currently, a 12.4 percent payroll tax on wages funds Social Se­curity and a 2.9 percent payroll tax funds Medicare Part A (Hospital Insurance).  But if payroll tax rates rise to meet unfunded obligations:  Complete Story