Social Security Actuary - A Summary of the 2004 Annual Reports

A Summary of the 2004 Annual Reports

Even the top Social Security Actuary admits:

"The growing annual cash deficits in both programs will lead to exhaustion in trust fund reserves for HI (Medicare Health Insurance) in 2019 and for Social Security in 2042."

"Social Security could be brought into actuarial balance over the next 75 years in various ways, including an immediate increase in payroll taxes of 15 percent or an immediate reduction in benefits of 13 percent (or some combination of the two). To the extent that changes are delayed or phased in gradually, greater adjustments in scheduled benefits and revenues would be required. Ensuring the sustainability of the system beyond 2078 would require even larger changes."

"As we reported last year, Medicare's financial difficulties come sooner--and are much more severe--than those confronting Social Security. While both programs face essentially the same demographic challenge, health care costs per enrollee are projected to rise faster than the wages per worker on which the payroll tax is paid and on which Social Security benefits are based. As a result, while Medicare's annual costs are currently 2.7 percent of GDP, or about 60 percent of Social Security's, they are now projected to surpass Social Security expenditures in 2024 and reach almost 14 percent of GDP in 2078, more than twice the percent for Social Security in that year."

"The projected 75-year actuarial deficit in the Hospital Insurance (HI) Trust Fund is now 3.12 percent of taxable payroll, up significantly from 2.40 percent in last year's report mainly due to higher actual and projected hospital expenditures, as well as lower actual and projected taxable payroll, and new Medicare legislation. The fund now fails our test of short-range financial adequacy, as assets drop below the level of the next year's projected expenditures within 10 years--in 2012. The fund also continues to fail our long-range test of close actuarial balance by a wide margin. The projected date of HI Trust Fund exhaustion has moved forward significantly to 2019, from 2026 in last year's report, and projected HI tax income falls short of outlays beginning this year, as compared to 2013 in last year's report. HI could be brought into actuarial balance over the next 75 years by an immediate 108 percent increase in program income or an immediate 48 percent reduction in program outlays (or some combination of the two). However, as with Social Security, adjustments of far greater magnitude would be necessary to the extent changes are delayed or phased in gradually, and continuation of the program after 2078 would require substantial changes."

For those of you who think government programs are poorly administrated and inefficient:

Administrative expenses, as a percentage of total expenditures, were:

OASI DI HI SMI
0.6 2.7 1.6 1.8

Old-Age and Survivors Insurance (OASI)
Disability Insurance (DI)
Medicare Hospital Insurance (HI)
Medicare Supplementary Medical Insurance (SMI)


This report is signed by treasury secretary John Snow.

I happened to watch John Snow on Wolf Blitzer this past Sunday talking about Social Security. Among many misleading comments like how to deflate the deficit:

"Only two ways to do that: One, you grow the economy. And we're doing that. The economy's growing. As the economy grows, government receipts rise.

But secondly, we've got to watch spending. And that's the key. We've got to control spending. You'll see in this budget that will be coming forth soon that spending will be under tight wraps."

Snow also said: "Well, Wolf, deficits matter, we know that" (Take that Cheney with your "Reagan proved deficits don't matter."

I digress:
What the Cheif Financial Messenger failed to discuss is Medicare.

No credit to Wolf who grilled him on budget issues (without getting an answer) but of course Wolf doesn't check the actuaries reports as part of his broadcast. He did cite that famous UFO poll.

Read the report if you can stay awake it is a much better education than you can get on the TV.

However, the word crisis is not mentioned when the report discusses social security.