Fox & Friends distorted a recent Social Security and Medicare Boards of Trustees report to fearmonger about the programs' solvency by claiming that the report significantly revised the date at which the Social Security trust fund would no longer be solvent. In fact, the report changed the projected solvency of the Social Security trust fund by just one year, and after that point the fund would continue to pay out benefits at 77 percent; and even without legislative action, after 2024, Medicare payments would continue to be funded for an additional 60 years at levels between 75 and 90 percent.
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Kilmeade Distorts Trustees' Findings About Social Security, Medicare
Kilmeade Bungles Trustees' Report To Claim Social Security Would Have "Run Out In 2050" Before Report. On the May 16 edition of Fox News' Fox & Friends, the co-hosts discussed whether or not Congress will vote to raise the national debt ceiling. After a clip of Speaker John Boehner's comments about the budget and debt, co-host Brian Kilmeade said:
KILMEADE: There's two things that came out over the weekend I felt were noteworthy leading into the interview. Number one, the trustees in charge of Social Security and Medicare came forward and said, "You know I told you that Social Security was going to run out in 2050? Can we change that to 2036?" OK. I think it's time to look at that. [Fox News, Fox & Friends, 5/16/11]
Kilmeade: "Medicare" Is "Going To Run Out In 2024" -- "If This Doesn't Spell An Emergency, I Don't Know What It Is." From the broadcast:
KILMEADE: And Medicare, remember I told you it's in trouble? Can we say it's going to run out in 2024? I just did the new math through the long recession. Revenue has fallen to -- and medical costs have risen to a certain level, that now we're going to be out. Now if this doesn't spell an emergency, I don't know what it is. [Fox News, Fox & Friends, 5/16/11]
But Trustees' Report Changed Social Security Solvency Projection By Just One Year, Not 14
Trustees' Report: "Trust Fund Reserves" Will Be "Exhausted In 2036, One Year Earlier Than Was Projected Last Year." From a summary of the 2011 Annual Report:
Social Security expenditures exceeded the program's non-interest income in 2010 for the first time since 1983. The $49 billion deficit last year (excluding interest income) and $46 billion projected deficit in 2011 are in large part due to the weakened economy and to downward income adjustments that correct for excess payroll tax revenue credited to the trust funds in earlier years. [...] Through 2022, the annual cash deficits will be made up by redeeming trust fund assets from the General Fund of the Treasury. Because these redemptions will be less than interest earnings, trust fund balances will continue to grow. After 2022, trust fund assets will be redeemed in amounts that exceed interest earnings until trust fund reserves are exhausted in 2036, one year earlier than was projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2085. [Social Security Administration, accessed 5/16/11, emphasis added]
WaPo: Since 1999, Board Of Trustees' Projections For Social Security Trust Fund's "Depletion" Has Ranged From 2034-2042. In a May 13, 2009, article, the Washington Post included the following chart of the Board of Trustees' projections related to the Social Security Trust Fund's solvency since 1999:
[The Washington Post, 5/13/09]
Commissioner Astrue: The Change Is "A Rounding Error In Terms Of Its Significance." At a press conference on May 13, Social Security Commissioner Michael Astrue said the revised estimate is "a rounding error in terms of its significance." From a transcript of the briefing at the Treasury, as printed by Congressional Quarterly:
Q: Could you explain the distinction between Social Security being in deficit and the trust funds being exhausted? Is it slightly deceptive to talk about Social Security running a deficit currently, considering it takes in less than it pays out until 2036?
MR. ASTRUE: Actually, I'm glad -- can you hear me? Good. Actually, I'm glad you asked that -- I actually in last year's press conference stressed the importance of the media understanding the term "exhaustion," which means something different to the actuaries than it does to the average person, and that what exhaustion in 2036 this year this means is that we'll have money to pay a little bit more than three-quarters of benefits, with no other legislative changes. Now that's not good. You know, we need to have the Congress step up and make changes so that that's not the outcome. But that's radically different from it's totally bankrupt, there's nothing there at all. It's a constant irritation to me, picking up the news clips and seeing how often the media reports that exhaustion figure as if there would be no money left in the trust fund. So bless you for asking that question.
In terms of cash flow, I have a somewhat similar response. We've moved to -- from very slightly positive in several of the coming years to very slightly negative. It is a rounding error in terms of its significance, in my opinion, and has no significance in terms of the long-term future of Social Security.
Again, as I stressed last year, what matters in the long run is the exhaustion date and percentage of benefits we can pay after exhaustion.
Whether we are -- from -- in terms of point of view of Social Security and the stability of the system, there's really -- these tiny swings in the grand scheme of things from one year to another, from slightly cash-flow positive to slightly cash-flow negative, in my opinion, are not significant for the long-term future of the program. [Congressional Quarterly, 5/13/11, accessed via Nexis, emphasis added; Social Security Administration, accessed 5/16/11]
Strengthen Social Security: "With No Action Social Security Will Have Sufficient Income And Assets To Pay All Monthly Benefits ... Until 2036." From a press release from the organization Strengthen Social Security:
Social Security's surplus is projected to be $2.7 trillion in 2011, and the surplus is projected to peak at $3.7 trillion in 2022. With no action Social Security will have sufficient income and assets to pay all monthly benefits in full and on time until 2036.
This data shows that Social Security is not in crisis. It also does not contribute to the federal deficit. By law, Social Security cannot borrow and it cannot make benefit payments if it lacks the revenue to cover them. Its only recourse is to cut benefits. That is why Social Security should not be part of any deficit-reduction deal. [Strengthen Social Security, accessed 5/16/11]
And Even Without Changes, Social Security Beneficiaries Would Still Receive 77 Percent Of Benefits After 2036
Trustees' Report: "After Trust Fund Exhaustion, Continuing Tax Income Would Be Sufficient To Pay 77 Percent Of Scheduled Benefits In 2036 And 74 Percent In 2085." Looking at both the Old-Age and Survivors Insurance and Disability Insurance trust funds of Social Security, usually "considered on a combined basis designated OASDI," the 2011 Trustees' report found:
The report indicates that annual OASDI income, including payments of interest to the trust funds from the General Fund, will exceed annual cost every year until 2023, increasing the nominal value of combined OASDI trust fund assets. Beginning in 2023, net redemptions of trust fund assets with General Fund payments will be required until assets are exhausted in 2036. After trust fund exhaustion, continuing tax income would be sufficient to pay 77 percent of scheduled benefits in 2036 and 74 percent in 2085. [Social Security Administration, accessed 5/16/11]
After 2024, Medicare Will Pay Out 75-90 Percent Of Benefits
Trustees' Report: After Medicare Trust Fund Exhaustion, "Dedicated Revenues Would ... Pay 90 Percent" Of Costs, Then "75 Percent In 2045," And "88 Percent In 2085." From the Trustees' Report:
Relative to the combined Social Security Trust Funds, the Medicare HI Trust Fund faces a more immediate funding shortfall, though its longer term financial outlook is better under the assumptions employed in this report.
Medicare costs (including both HI and SMI expenditures) are projected to grow substantially from approximately 3.6 percent of GDP in 2010 to 5.5 percent of GDP by 2035, and to increase gradually thereafter to about 6.2 percent of GDP by 2085.
The projected 75-year actuarial deficit in the HI Trust Fund is 0.79 percent of taxable payroll, up from 0.66 percent projected in last year's report. The HI fund fails the test of short-range financial adequacy, as projected assets drop below one year's projected expenditures early in 2011. The fund also continues to fail the long-range test of close actuarial balance. Medicare's HI Trust Fund is expected to pay out more in hospital benefits and other expenditures than it receives in income in all future years. The projected date of HI Trust Fund exhaustion is 2024, five years earlier than estimated in last year's report, at which time dedicated revenues would be sufficient to pay 90 percent of HI costs. The share of HI expenditures that can be financed with HI dedicated revenues is projected to decline slowly to 75 percent in 2045, and then to rise slowly, reaching 88 percent in 2085. Over 75 years, HI's actuarial imbalance is estimated to be equivalent to 21 percent of tax receipts or 17 percent of program outlays. [Social Security Administration, accessed 5/16/11, emphasis added]