Medicare’s trust fund will run out in 2026 and the combined trust funds of Social Security will run out in 2034, the trustees for the government programs projected Tuesday.
The projected exhaustion of Social Security’s trust fund is unchanged from last year. For Medicare’s hospital insurance trust fund, the date has been moved up three years.
If the Social Security trust funds do expire as projected, beneficiaries would face an immediate cut of about a fifth of their benefits.
Tuesday’s report also indicated that Social Security’s costs are expected to exceed revenues this year for the first time since 1982.
The trustees, including Treasury Secretary Steven Mnuchin, Labor Secretary Alex Acosta, and Health and Human Services Secretary Alex Azar, called on Congress to address the shortfalls “in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them.”
The revised dates of Medicare’s trust fund exhaustion raises the prospect of a major fiscal showdown facing Congress. The individual tax cuts implemented as part of the GOP tax overhaul are also set to expire at the end of 2025, meaning that lawmakers could have to navigate major changes in federal taxing and spending in short order, just as they did with the 2012 “fiscal cliff.”
President Trump has ruled out changes to Social Security retirement, although he has called for reforms to the disability program as part of his budgets authored by Office of Management and Budget director Mick Mulvaney.
In a separately released statement, Mnuchin attributed the programs’ fiscal shortages to slow economic growth and the aging population. “The Administration’s economic agenda – tax cuts, regulatory reform, and improved trade agreements – will generate the long-term growth needed to help secure these programs and lead them to a more stable path,” he said.
Key congressional Republicans sounded more eager to pursue reform legislation.
“These reports make clear that we need to act to strengthen these important programs,” said House Ways and Means Committee chairman Kevin Brady, R-Tx. “The time is now to come together in a bipartisan manner to address these real challenges.”
Major changes to spending or taxes will likely be needed to address the entitlement programs’ finances.
Over a long time frame of 75 years, the hypothetical combined Social Security trust fund faces a shortfall of around $13.2 trillion, up from $12.5 trillion last year.
The trustees put that number in perspective by laying out what it would take to close the gap: An immediate hike in the payroll tax of 2.78 percentage points, raising it to 15.18 percent, or an immediate reduction in benefits of 17 percent.
There was some good news, though, in Tuesday’s report. Fewer people are applying for and receiving disability insurance through Social Security as the economy improves, helping to shore up the disability trust fund.
The trust funds for disability insurance and retirement benefits are actually separate. Tuesday’s report showed that the fund for disability is expected to run out in 2032, later than the 2028 date projected last year.
Typically, the trustees would include both cabinet officials, the head of the Social Security Administration, and bipartisan public trustees. The reports, though, have recently been prepared without the input of the public trustees, who would require nominations and Senate confirmation.
