The Medicare and Social Security annual report, released yesterday, shows that the insolvency date for the Social Security Disability Insurance (DI) trust fund remains unchanged at 2016. While the fundamental outlook remains materially unchanged for both the Social Security Old Age and Survivors Insurance (OASI) trust fund and the combined (OASDI) trust funds, another year has been lost to inaction.
Mercatus Center senior research fellow Charles Blahous, along with fellow public trustee for Medicare and Social Security Robert Reischauer, warn not to mistake minor improvements in the projected solvency of either program for "financial viability." They note in the "Message from the Public Trustees":
"To ensure that [Medicare and Social Security] function adequately, policy makers will need to consult other information in [the trustees] reports beyond the mere projected duration of trust fund adequacy."
For Social Security, they caution policy makers on the hazards of further postponing "unavoidable corrective actions" and note that the program's current shortfall projection is much larger than that solved—with so much difficulty—by the 1983 reforms:
"...[W]hen the trust funds faced a threat of depletion in the early 1980s it was still fully possible, though difficult to be sure, to close the financing gap.
Continued inaction…to the point where the combined trust funds near depletion would—unlike the situation in 1983—likely preclude any plausible opportunity to maintain Social Security’s historical financing structure.
The imminent depletion of Social Security's Disability Insurance [DI] Trust Fund reserves is but the first financing crisis arising from program cost growth trends that have been evident for the past few decades.
While legislative action is not yet necessary to prevent imminent reductions in Old-Age and Survivors Insurance [OASI] benefits…prompt action is needed to prevent Social Security’s aggregate financial shortfall from growing to an intractable size."
Please click here to view the full letter, as well as the full summary of the 2015 Annual Reports of the Social Security and Medicare Boards of Trustees.
Mercatus Center senior research fellow Jason Fichtner, former deputy commissioner and chief economist of the Social Security Administration, said the following in response to the report:
"I fear the slight improvement in the insolvency date for Social Security’s combined trust fund will give law makers and the public a false sense that the program’s financial problems are anything less than urgent—that reform can continue to be put off. Such a misunderstanding would lead to grave consequences for beneficiaries of both the disability and retirement programs.
The delay in dealing with the needed structural and financial problems of the DI trust fund should be a wake up call for those concerned with the OASI retirement trust fund—delaying meaningful reforms only limits the options available."