The Congressional Budget Office (CBO) released a new report predicting that spending on Social Security and Medicare will almost double by 2033 due to the rising cost of medical services and an increasing number of people becoming eligible for these programs. The CBO estimates that the combined cost of Social Security and Medicare will reach $4 trillion by 2033, representing more than 10 percent of the country’s total economic output.
Social Security spending is projected to increase by $123 billion in fiscal 2023, a 10 percent spike largely due to the 8.7 percent cost-of-living increase for Social Security beneficiaries that took effect last month. Medicare spending is expected to more than double, from $710 billion in the last fiscal year to more than $1.6 trillion in 2033. The CBO also found that the federal debt is on pace to balloon to roughly $50 trillion a decade from now, as annual deficits are projected to rise from $1.4 trillion this fiscal year to $2.9 trillion in 2033.
As a result of this increased spending, the Social Security program faces a funding shortfall in 2032 and Medicare is projected to experience a funding shortfall in 2028. Democrats have floated a series of tax hikes on the wealthiest taxpayers to cover the shortfalls, including a proposal to apply the Social Security tax to incomes above $400,000 a year. At the same time, Republican leaders have ruled out proposals to link the debt limit fight to entitlement reforms and instead shifted their attention to discretionary funding hashed out by Congress every year.
If the Social Security funds become insolvent and there is no change to current laws, beneficiaries would see a more than 20 percent reduction in their benefits. High inflation can also lead to high wage growth, which may ultimately improve the solvency of the Social Security system, since it depends on taxing wages. A major point of dispute is whether Social Security would be affected by any of the proposed cuts. The Biden administration has accused the GOP of trying to reduce funding for the program. Biden seemed to extracted a promise from Republican lawmakers to leave Social Security and Medicare unscathed in debt ceiling negotiations during his State of the Union address.
0. “CBO warns of sharp uptick in Social Security, Medicare spending” msnNOW, 15 Feb. 2023, https://www.msn.com/en-us/news/politics/cbo-warns-of-sharp-uptick-in-social-security-medicare-spending/ar-AA17wRk2
1. “Budget report shows Social Security unsustainable, national deficit to drastically increase this decade” FISM TV, 16 Feb. 2023, https://fism.tv/budget-report-shows-social-security-unsustainable-national-deficit-to-drastically-increase-this-decade/
2. “New forecasts show Medicare and Social Security spending growth rapidly outpacing the growth in federal tax …” The Boston Globe, 15 Feb. 2023, https://www.bostonglobe.com/2023/02/15/nation/new-forecasts-show-medicare-social-security-spending-growth-rapidly-outpacing-growth-federal-tax-revenues-over-next-10-years
3. “The Clock is Ticking: Social Security Funds to Deplete Sooner Than Expected” Techstory, 16 Feb. 2023, https://techstory.in/the-clock-is-ticking-social-security-funds-to-deplete-sooner-than-expected/
4. “Growing Social Security Costs Will Help Fuel $18.8 Trillion In Deficits By 2033” Investopedia, 15 Feb. 2023, https://www.investopedia.com/growing-social-security-costs-will-help-fuel-usd18-8-trillion-in-deficits-by-2033-7110328