This is really simple. Social Security's own numbers has it solvent until 2041 ... projecting ahead from the Bush Economy with essentially no income growth for people on incomes under $100,000 ... which means, no contributions growth from people on incomes under the $100,000 cap.
By contrast, even under the Clinton recovery, which was the second worst post-WWII economic recovery for income growth for the majority of Americans ... the trust fund surplus soared, because there was at least some income growth for people earning below the SS payroll tax cap.
All we have to do is restore balanced income growth between the top 5% of the population and the super-majority 80% of the population, and that "crisis" in 2040 starts heading out at faster than a year per year ... which is the definition of "receding over the horizon".
The real crisis is Medicare ... and that requires at the outset establishment of universal health care so that we can get a handle on cost shifting and start getting our rampant health care price inflation under control.
On the other hand Medicare explictly uses Intermediate Cost assumptions, meaning that their revenues going forward are likely to be larger than projected. Interestingly I have the paper report in front of me and it doesn't present Low Cost.
Even so we have this from page 3 of the 2007 Report. "Under the intermediate assumptions the HI trust fund is projected to be exhausted in 2019, 1 year later than in last year's report, due to slightly higher projected payroll tax and slightly lower projected benefits than previously estimated."
In other words their models are too pessimistic. In 1992 Medicare was projected to have the HI Trust Fund hit zero in 1999. Over the last 15 years that date has been pushed back 20 years. I am not going to project 'receding over the horizon', but similar effects are happening here.
Obviously Medicare has problems, but the magnitude of those problems is hidden behind pessimistic revenue forecasts. If we ever get some honest forecasts in Intermediate Cost then we can get a handle on the whole picture. Until then don't fully trust those numbers in the papers, they are distorted by the economic model.
Out for the day.
Last note. Trend productivity more than rescues Social Security, at some point and soon we are likely to be see proposals to cut FICA. But alternately we could divert that cut one for one to Medicare payroll tax. Same combined rate, different split. The combination between that and underestimated revenues going forward might make for a surprising picture. We'll have to see.
A lot could happen over the next four years if we can just get a Democrat in the White House. The numbers just aren't as dark as they are being painted.
