The Social Security and MediCare problem in a simple paragraph

I worked from the age of 18 and paid into social security and medicare. For the past 20 years I built up a small cash reserve in my savings account.

Let’s say that over the past 20 years I accumulated $50,000 in my savings account. After retiring, my monthly income from social security, a few IRAs and my company 401k is $2,000 a month. My expenditures for the month amounts to $2,300 a month, so to pay for everything each month, I have to use $300 from my savings account. So that by year 14 of my retirement, I will have used up the funds in my savings account and will no longer be able to make all my monthly payments.

So, I have 2 choices. Either increase my monthly income or reduce my expenses. So this is the choices that currently faces Social Security and Medicare… increase income or reduce expenditures.

And the Republican Solution is to “pull Social Security up by the roots and get rid of it…” or sunset Social Security entirely.

So, the question is simply this: Got An IDEA?

Medicare and Social Security insolvency is right around the corner

Both sides are misleading people.

President Joe Biden is accusing Republicans of wanting to cut Social Security and Medicare. He says he’ll protect these key pillars of the social safety net.

Republicans, while they do want cuts to deal with “runaway” Washington spending, have promised they won’t touch Social Security and Medicare (or defense spending).

Biden’s promise – focused on Florida Sen. Rick Scott’s fanciful proposal to require federal laws, including those safety net programs, to expire after five years if they are not renewed by Congress – seems completely political.

Republicans’ promise to make cuts without touching the safety net or the Pentagon seems mathematically impossible.

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There is nothing complicated about fixing Social Security, according to R. Douglas Arnold, the William Church Osborn Professor of Public Affairs, Emeritus, and professor of politics and public affairs, emeritus, at Princeton University. Legislators could simply raise taxes or they could cut benefits — by raising the retirement age, for example. What remains complicated are the politics of fixing Social Security, Arnold argues in a new book published by Princeton University Press.

The last solvency crisis was in 1983. At that time, legislators changed the tax and benefit formulas in ways that gradually built up the trust fund to almost $3 trillion. But right now Social Security is devouring its trust fund. Payroll taxes are no longer sufficient to pay all benefits. So, every month, Social Security withdraws more and more money from the trust fund. And the reason is the retirement of the huge baby boom generation. The next generation is not as large, so Social Security is not getting enough tax revenue.

Projections show that the trust fund will be empty by 2034. At that point, Social Security will have enough revenue to pay only 78% of benefits. And that is what we call the solvency crisis. It happened in 1977, and again in 1983, and each time legislators came together and fixed it. But Congress has been ignoring the problem since 1994, when the actuaries first identified it. The question remains: Will legislators ignore it for the next 12 years, or act sooner?

Read More Princeton School of Public and International Affairs

Payroll taxes are no longer sufficient to pay all benefits. So, every month, Social Security withdraws more and more money from the trust fund. And the reason is the retirement of the huge baby boom generation. The next generation is not as large, so Social Security is not getting enough tax revenue.

Asset reserves grew from about $47 billion at the end of December 1986 to about $2,830 billion ($2.8 trillion) by the end of December 2022. The Asset however isn’t considered to be cash.

Social Security Site

There is a Social Security Issue in America. The cause of the issue can be traced to one cause: your government, Republican and Democrat borrowing from Social Security and not paying back the loan.

In 2023, an average of almost 67 million Americans per month will receive a Social Security benefit, totaling over one trillion dollars in benefits paid during the year. Social Security is the major source of income for most of the elderly. Social Security provides more than just retirement benefits.

Around 25% of the adult U.S. population receives some form of Social Security benefit. Overall, this is divided into three major groups: retirees, disabled individuals, and survivors. Retirees are by far the largest group, making up 75.2% of beneficiaries.

Every year, the Social Security Board of Trustees releases a report examining the short-term (10 year) and long-term (75 year) outlook for America’s most important social program. Since 1985 , it’s been warning that long-term revenue wouldn’t be sufficient to sustain the existing payout schedule, which includes assumptions for annual cost-of-living adjustments. Ongoing demographic changes that include the retirement of baby boomers, increased longevity, lower fertility rates, and growing income inequality, are adversely impacting Social Security.

The Motley Fool (After reading this article, I had more questions than answers.)

Story Dated: February 04, 2019

Based on the estimates of the Trustees, Social Security’s $2.9 trillion in asset reserves will be completely gone by 2034. Should lawmakers not find a way to raise additional revenue and/or cut expenditures by then, an across-the-board cut in benefits of up to 21% may await. That’s particularly worrisome, given that 62% of retired workers rely on their benefit check to account for at least half of their income.

The Social Security program has accrued close to $2.9 trillion in net cash surpluses since its inception, with nearly all of this amount being generated over the past 35 years. Put another way, the program has collected more money than it’s expended every year since 1983.

So, where is this money?

By law, these net cash surpluses are required to be invested in special-issue government bonds and, to a lesser extent, certificates of indebtedness. In return, the federal government gets access to $2.9 trillion in borrowing capacity that it can use for normal line items in its budget. In other words, Social Security’s Trust has $2.9 trillion in asset reserves, but not a red cent of cash in the vault, so to speak.

This raises a question for me. The nature of the $2.9 Trillion cash surplus has somehow changed to be only an asset, so to speak, and we simply can deal in “so to speaks”…

Social Security’s Trust has $2.9 trillion in asset reserves, which at some point was CASH and now is considered to be only an ASSET, which some how isn’t the same as cash.

The Social Security fund supposedly receives interest, but who knows if this interest is “cash”…

The fact is that Congress, despite borrowing $2.9 trillion from Social Security, hasn’t pilfered or misappropriated a red cent from the program. Regardless of whether Social Security was presented as a unified budget under Lyndon B. Johnson or as a separate entity (i.e., off budget), none of its funding has been conflated with normal federal spending.

So no one is suggesting that the “cash” has been pilfered, but the “cash” has been borrowed, so where is the “cash” now? And why has it not been repaid?

Social Security Trust received $85 billion dollars in interest on the government borrowings, which if the government repaid what the government has borrowed, Social Security would lose the interest income.

Lastly, regardless of whether Social Security owns government-issued bonds or cash, it doesn’t change the asset reserves held by the program. It’s $2.9 trillion either way. To suggest that repaying these bonds would put the program on more solid footing is simply not correct, as it’d have no impact on the program’s total assets, and it would actually hurt its revenue-generating prospects.


By law, there are six Trustees, four of whom serve by virtue of their positions in the Federal Government: the Secretary of the Treasury, the Secretary of Labor, the Secretary of Health and Human Services, and the Commissioner of Social Security. The other two Trustees are public representatives appointed by the President, subject to confirmation by the Senate. The two Public Trustee positions have been vacant since 2015.

Social Security is financed by payroll taxes paid by covered workers and their employers, federal income taxes paid by some beneficiaries on a portion of their benefits, and interest income from the Social Security trust fund investments. Social Security tax revenues are invested in U.S. government securities (special issues) held by the trust funds, and these securities earn interest. The tax revenues exchanged for the U.S. government securities are deposited into the General Fund of the Treasury and are indistinguishable from revenues in the General Fund that come from other sources. Because the assets held by the trust funds are U.S. government securities, the trust fund balance represents the amount of money owed to the Social Security trust funds by the General Fund of the Treasury. Funds needed to pay Social Security benefits and administrative expenses come from the redemption or sale of U.S. government securities held by the trust funds.