Congress Urged to Act Soon on Social Security, Medicare

WASHINGTON — Warning that the two major entitlement programs for the elderly face long-term financial problems, the government's Medicare and Social Security trustees Tuesday urged Congress to act soon.

"If we do not take action soon to reform Social Security and Medicare, the coming demographic bulge will jeopardize the ability of these programs to support people who depend on them," said Treasury Secretary Henry M. Paulson Jr., referring to the wave of nearly 80 million Baby Boomers, the first of whom started drawing benefits this year.

"The longer we delay, the larger the required adjustments will be and the more heavily the burden of those adjustments will fall on future generations," Paulson said.

House Speaker Nancy Pelosi said in a statement that "the Democratic Congress is committed to keeping the promise of Social Security and Medicare to all Americans."

But she said Bush was largely to blame for the programs' predicament today. She said that by pursuing tax cuts, he turned the $5.6 trillion surplus he inherited into a $3 trillion deficit and "made it more difficult for future policy makers to strengthen Social Security and Medicare."

The programs will be unable to fully pay benefits beginning in 2019 and 2041 respectively, their trustees said.

After the trust funds are exhausted, each program would be able to pay about 78 percent of benefits through payroll tax revenues, officials said.

The predicted dates for the two major federal program for the elderly are the same as predicted last year, despite the recent downturn in the economy. But that means the funds' life expectancy is one year shorter.

Both programs will begin to run into financial trouble long before their credited reserves are exhausted, the trustees said.

Sometime this year, Medicare will begin paying out more money than it brings in through payroll taxes. The same will happen to Social Security in three years.

Both programs will be able to continue fully paying benefits for many more years because they have accumulated reserves in the form of special Treasury bonds that rely on the "full faith and credit" of the U.S. government.

INSOLVENCY CREEPING CLOSER

Social Security and Medicare trustees' predictions of the number of years before the programs' trust funds will be exhausted.

Report Year........Social Security........Medicare

2002..................41.........................28

2003..................39.........................23

2004..................38.........................15

2005..................36.........................15

2006..................34.........................12

2007..................34.........................12

2008..................33.........................11