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Tuesday, July 29, 2014

Social Security's Disability Insurance Trust Fund is Only Two Years Away From Running Out of Money

The Trustees Summery Report admits this:

 The Medicare Hospital Insurance Trust Fund (HI) will have sufficient funds to cover its obligations until 2030 based on the tortured accounting.

That said, remove the phony accounting and the real situation is
even worse. The trust funds don't hold any cash as reserves. They hold US government Treasury securities and the US government doesn't have the cash on hand to payoff for the redemption of those securities. So the real crisis isn't when the trusts finish selling off the Treasury securities, it is when the the redemption requirements become sizable and the Treasury will be desperate to sell more debt to payoff the trust fund redemptions.

Concern about the long-range financial outlook for Medicare and Social Security often focuses on the depletion dates for the HI and OASDI trust funds—the times when the projected trust fund balances under current law will be insufficient to pay the full amounts of scheduled benefits. A more immediate issue is the effect the programs have on the unified Federal budget prior to depletion of the trust funds.
Chart D  shows the excess of scheduled costs over dedicated tax and premium income for the OASDI, HI, and SMI trust funds expressed as percentages of GDP. Each of these trust funds’ operations will contribute increasing amounts to Federal unified budget deficits in future years.

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