The Social Security retirement fund could run out of money as soon as 2033, a year earlier than previously projected, according to a new government report released Friday.
The acceleration toward insolvency is largely the result of a 3% downward revision of gross domestic product and labor productivity over the next decade, findings from the Social Security and Medicare Trustees report show.
Unless major changes are made before 2034 to shore up the entitlement program, more than 66 million Americans would see a benefit reduction between about 23% to 25%.
In this photo illustration, a Social Security card sits alongside checks from the U.S. Treasury on October 14, 2021 in Washington, DC. (Kevin Dietsch/Getty Images / Getty Images)
Medicare, meanwhile, faces an even greater financial shortfall in the coming years: The report showed that Medicares's hospital insurance trust fund – which is known as Part A and helps to cover inpatient hospital stays – will only be able to pay scheduled benefits in full until 2031, according to the report. That is three years later than the trustees previously projected.
At that point, the fund's reserves will "become depleted and continuing program income will be sufficient to pay 89 percent of total scheduled benefits," the report said. It could result in an 11% pay reduction to health care providers.
Treasury Secretary Janet Yellen, who leads the trustee, emphasized the need to bolster both the Medicare and Social Security funds.
U.S. Treasury Secretary Janet Yellen testifies about the Biden Administration's FY2024 federal budget proposal before the Senate Finance Committee in the Dirksen Senate Office Building on Capitol Hill on March 16, 2023 in Washington, DC. (Chip Somod
"Social Security and Medicare are two bedrock programs that older American rely upon for their retirement security," she said in a statement. "The Biden-Harris Administration is committed to ensuring the long-term viability of these critical programs so that retirees can receive the hard-earned benefits they’re owed."
The future of the program has emerged as a contentious issue between Republicans and Democrats, after Presidnet Biden accused GOP lawmakers of wanting to slash funding for Medicare and Social Security during his State of the Union Address.
Republicans have repeatedly pushed back on that assertion, insisting they do not want to cut funding for either of the entitlement programs.
A view of the US Capitol with last cherry blossoms in Washington D.C., United States on March 30, 2023. (Photo by Arturo Jimenez/Anadolu Agency via Getty Images)
Biden proposed raising Medicare taxes from 3.8% to 5% on annual income above $400,000 in his budget proposal earlier this month. He also floated closing a loophole used by business owners and higher-earners to shield some of their income from additional taxes.
The White House estimated the floated changes would extend the Medicare trust fund by an additional 25 years, "beyond 2050."
The proposals are unlikely to garner much support in a deeply divided Congress, and face almost certain rejection from Republicans who won control of the House last year.
The president did not address the looming Social Security insolvency in his budget.