Nearly two years ago in this space, I wrote about David Walker's "Fiscal Wake-up Tour," where the former head of the Government Accountability Office spent nearly three years warning the country about its "imprudent and unsustainable fiscal path," particularly with regard to the budget-depleting entitlement programs - Social Security, Medicare and Medicaid.
Walker revealed a series of sobering statistics, the highlight of which being that the aggregate cost of the entitlement trio would exceed projected federal revenue by $50 trillion (yes, with a "t") over the next 75 years. That represented roughly 95 percent of the net worth of every U.S. resident.
He stressed that to solve this looming financial contagion, Washington would need bipartisan cooperation and, of course, the courage to make some tough choices in the longer term.
But that preceded the financial meltdown, which, as you may imagine, only exacerbated an already dire situation.
Last month, the trustees of Social Security and Medicare reported, to no one's surprise, that Medicare is now paying out more than it receives, while the same harsh reality will impact Social Security in 2016 - a year sooner than originally projected.
Want more good news? Medicare will be insolvent by 2017, two years earlier than the depletion date in the 2008 trustee's report. Social Security's trust fund, meanwhile, will be bone-dry by 2037, four years earlier than predicted.
The recession also downgraded last year's projections from the Congressional Budget Office, to where Social Security would collect just $3 billion more in 2010 than it will pay out in benefits. Last year, the CBO had projected that Social Security would have an $86 billion surplus for fiscal 2010.
Now, while some would correctly point out that a smaller surplus does not directly impact benefit payments, it does mean that the government would have to borrow more at what can be safely labeled an inopportune time when it has already handed out billions in bailout funds. And it doesn't help when the budget deficit is forecast at $1.84 trillion and at least $500 billion each year through the next decade.
For the time being, Social Security's surplus has allowed the government to spend that money on other programs, with an IOU to the trust fund. As bad as Social Security is, however, skyrocketing health care costs have put Medicare in a far graver condition, perhaps not all that far from requiring Extreme Unction.
The report will no doubt ignite a vocal exchange on Capitol Hill, and questions as to why something hasn't been done to take on what can inarguably be described as grave budget concerns.
According to reports, President Obama is expected to tackle the problems at Medicare before addressing Social Security.
That's a start, to be sure.
But all those who politely applauded David Walker at after-dinner speeches and lectures, and determined his message to be apocalyptic, are surely paying attention now.
(c) 2009 Accounting Today and SourceMedia, Inc. All Rights Reserved.
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