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Medicare will become insolvent in 2026, U.S. government says (2018) LA Times
nonstopflu
Established Member
==
latimes, june 5, 2018
Medicare will run out of money sooner than expected, and Social Security's financial problems can't be ignored either, the government said Tuesday in a sobering checkup on programs vital to the middle class.
The report from program trustees says Medicare will become insolvent in 2026 — three years earlier than previously forecast. Its giant trust fund for inpatient care won't be able to fully cover projected medical bills starting at that point.
The report says Social Security will become insolvent in 2034 — no change from the projection last year.
The warning serves as a reminder of major issues left to languish while Washington plunges deeper into partisan strife. Because of the deterioration in Medicare's finances, officials said the Trump administration will be required by law to send Congress a plan next year to address the problems, after the president's budget is submitted.
Treasury Secretary Steven Mnuchin said in a statement that there's time to fix the problems. "The programs remain secure," Mnuchin said. Medicare "is on track to meet its obligations to beneficiaries well into the next decade."
"However, certain long-term issues persist," the statement added. "Lackluster economic growth in previous years, coupled with an aging population, has contributed to the projected shortages for both Social Security and Medicare."
Social Security recipients are likely to see a cost of living increase of about 2.4% next year, working out to roughly $31 a month, government experts said.
At the same time, the monthly Medicare "Part B" premium for outpatient care paid by most beneficiaries is projected to rise by about $1.50, to $135.50.
Both the cost-of-living increase and the Medicare outpatient premium are not officially determined until later in the year, and the initial projections can change.
More than 62 million retirees, disabled workers, spouses and surviving children receive Social Security benefits. The average monthly payment is $1,294 for all beneficiaries. Medicare provides health insurance for about 60 million people, most of whom are age 65 or older.
Together the two programs have been credited with dramatically reducing poverty among older people and extending life expectancy for Americans. Financed with payroll taxes collected from workers and employers, Social Security and Medicare account for about 40% of government spending, excluding interest on the federal debt.
But demands on both programs are increasing as America ages.
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Luther Blissett
Senior Member (Voting Rights)
A quick reminder that the US Government cannot involuntarily run out of money. The size of a deficit is of absolutely no importance whatsoever, and any economist who thinks it is, is incompetent or a liar.
This piece is just wrong on it's assumptions. It is ignorant of how Government accounts work. It is ignorant of how the monetary system works.
It is equivalent to saying that the issuer of a currency will accidentally run out of currency to issue. It is equivalent to saying the NBA will accidentally run out of points to award a basketball team during a game.
This piece is just wrong on it's assumptions. It is ignorant of how Government accounts work. It is ignorant of how the monetary system works.
It is equivalent to saying that the issuer of a currency will accidentally run out of currency to issue. It is equivalent to saying the NBA will accidentally run out of points to award a basketball team during a game.
Alvin
Senior Member (Voting Rights)
While technically true the Federal Reserve is an arms length entity. It prints money as it sees fit, which can be influenced by the governing party choosing who heads it but is not supposed to command its actions directly. With the current government in power following rules and precedent is not happening of course, straight corruption is done in plain sight.
Printing more money does not make a program solvent, its only solvent if the money is printed then obtained and directed by the government in a particular direction. IIRC newly printed money is used to buy outstanding treasury bills, issue more and given to banks.
The government gets its operating funds from taxation, not directly from the treasury.
Luther Blissett
Senior Member (Voting Rights)
I'm afraid that is very wrong. The Government is not revenue constrained. It is not a household or business, it is the monopoly issuer of currency. Money received from taxation is destroyed. It was true when the currency was convertable to gold, but that ended with the collapse of the Bretton Woods system. The US dollar is non-convertable. The ultimate purpose of taxes is to create demand for the currency in order to pay those taxes. You cannot pay the taxman in apples.
If you went to you local IRS office and paid your tax in cash, after giving you a receipt, the cash would be taken and destroyed. They do not transport the cash to some other government office in order to spend it when needed. If they did there would be billions of dollars of cash whizzing around the country all day every day. A very juicy target for thieves.
Taxes can only be paid if the Government has spent the money into existence, not the other way around.
That is wrong, it prints money on the command of the Government. The separation is a fiction.
Alvin
Senior Member (Voting Rights)
This is partially correct but the Federal Reserve is the one who creates new money, though banks can multiply it. As i mentioned its considered an arms length agency.
Technically this is correct, money has the full force of the government issuing it
Fiat currency is no longer backed by gold but governments don't destroy money collected by taxation though they often spend it stupidly which could be metaphorically referred to as destruction
Right
In structure its arms length but as i mentioned the person who makes the decisions serves at the pleasure of the current president
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Luther Blissett
Senior Member (Voting Rights)
That is just factually wrong.
For a discussion of the 'money multiplier' see this http://bilbo.economicoutlook.net/blog/?p=1623
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Alvin
Senior Member (Voting Rights)
Allele
Senior Member (Voting Rights)
"Truth" is not a bad word. I don't suggest labelling someone as "truther" in the pejorative when you don't like what they are saying, because it shifts actual Truth into a murky space when you use it as a slur. None of us want that. Truth is always best, even if uncomfortable to face.
If you don't like that blog, @Alvin, I suggest looking into Nomi Prins, Naomi Klein, David Korten, others who I can't recall right now. There is much to ponder in the way economics have shifted behind the scenes. It's no wonder the world is in such chaos.
If you don't like that blog, @Alvin, I suggest looking into Nomi Prins, Naomi Klein, David Korten, others who I can't recall right now. There is much to ponder in the way economics have shifted behind the scenes. It's no wonder the world is in such chaos.
zzz
Senior Member (Voting Rights)
What @Alvin has been saying is correct. As an American who has studied economics, I will try to elaborate some more.
The Federal Reserve can indeed print money, but as @Alvin pointed out, it is essentially an independent agency. It creates money only as part of implementing monetary policy - essentially to influence interest rates directly, and indirectly, the rate of inflation. It does not print money when the government needs more money.
The federal government can and does run out of money. This has happened a number of times over the last several decades, and has resulted in government shutdowns, where the federal government closes all nonessential services because it has no money to pay for them.
For all practical purposes, the money creation abilities of the Federal Reserve are irrelevant when it comes to paying America's debts. The Federal Reserve has never printed its way out of these debts, and presumably never will. If it did, the US dollar would immediately lose the world's trust, as printing more dollars to get out of debt devalues the dollars currently in circulation. A significant devaluation of the dollar would lead to runaway inflation. Such scenarios have happened many times in countries that have attempt to get out of debt by printing more money.
One of the biggest problems in adding to the national debt is that this debt is typically in the form of treasury securities, and interest must be paid on them. The interest on the national debt consumes 7.4 percent of the fiscal year 2018 U.S. federal budget. That makes it the fourth largest budget item. If the US government were to default on this debt, confidence in the US dollar would immediately plunge, and the US government would have an extremely hard time selling additional treasury securities at anything approaching reasonable interest rates.
So the insolvency of Medicare is a very real problem. In the recent tax cut, 83% of the benefits of the tax cut went to the richest 1% of the population, who of course don't need Medicare. But they are interested in a strong national defense, which is beyond their personal means. So the US military budget remains the world's largest, as cuts are made to essential social services to pay for defense and the tax cuts.
The title article of this thread states:
For those not familiar with American politics, it should be noted that the word "overhauling" in this case is a euphemism for "cutting". The voucher-like system would not begin to provide the coverage that the current Medicare plan does. Eventually, it would result in the effective elimination of Medicare - one of Paul Ryan's long-term dreams that thankfully he has not been able to implement. Similarly, the privatization of Social Security would severely cut into the usefulness of that program. Such a move by President George Bush was rejected in 2005, and there does not appear to be strong momentum toward implementing such a change right now.
The Social Security tax is regressive in that it is applied only to workers earning $128,700 or less. (This amount increases slightly each year.) If the income cap were removed, and all people taxed at the current rate for Social Security, there would be no problems funding Social Security into the indefinite future. Funding Medicare, unfortunately, is a much more complex problem, at least under the current tax system.
The Federal Reserve can indeed print money, but as @Alvin pointed out, it is essentially an independent agency. It creates money only as part of implementing monetary policy - essentially to influence interest rates directly, and indirectly, the rate of inflation. It does not print money when the government needs more money.
The federal government can and does run out of money. This has happened a number of times over the last several decades, and has resulted in government shutdowns, where the federal government closes all nonessential services because it has no money to pay for them.
For all practical purposes, the money creation abilities of the Federal Reserve are irrelevant when it comes to paying America's debts. The Federal Reserve has never printed its way out of these debts, and presumably never will. If it did, the US dollar would immediately lose the world's trust, as printing more dollars to get out of debt devalues the dollars currently in circulation. A significant devaluation of the dollar would lead to runaway inflation. Such scenarios have happened many times in countries that have attempt to get out of debt by printing more money.
One of the biggest problems in adding to the national debt is that this debt is typically in the form of treasury securities, and interest must be paid on them. The interest on the national debt consumes 7.4 percent of the fiscal year 2018 U.S. federal budget. That makes it the fourth largest budget item. If the US government were to default on this debt, confidence in the US dollar would immediately plunge, and the US government would have an extremely hard time selling additional treasury securities at anything approaching reasonable interest rates.
So the insolvency of Medicare is a very real problem. In the recent tax cut, 83% of the benefits of the tax cut went to the richest 1% of the population, who of course don't need Medicare. But they are interested in a strong national defense, which is beyond their personal means. So the US military budget remains the world's largest, as cuts are made to essential social services to pay for defense and the tax cuts.
The title article of this thread states:
For those not familiar with American politics, it should be noted that the word "overhauling" in this case is a euphemism for "cutting". The voucher-like system would not begin to provide the coverage that the current Medicare plan does. Eventually, it would result in the effective elimination of Medicare - one of Paul Ryan's long-term dreams that thankfully he has not been able to implement. Similarly, the privatization of Social Security would severely cut into the usefulness of that program. Such a move by President George Bush was rejected in 2005, and there does not appear to be strong momentum toward implementing such a change right now.
The Social Security tax is regressive in that it is applied only to workers earning $128,700 or less. (This amount increases slightly each year.) If the income cap were removed, and all people taxed at the current rate for Social Security, there would be no problems funding Social Security into the indefinite future. Funding Medicare, unfortunately, is a much more complex problem, at least under the current tax system.
Luther Blissett
Senior Member (Voting Rights)
This is weird. I'm going to make one last post and leave it there. I'm not arguing about economics, I'm arguing about double entry book keeping.
This is basic history of money stuff. Going back to tally sticks. Chartalists, The State Theory of Money, Keynes, Minsky, even Greenspan!, National Accounting, GDP, Government deficit = Private Savings.
It's a basic accounting rule that if the Federal Reserve paid off all debts, there would be no private savings.
GDP = C + I + G + (X - M)
What enables the Federal Reserve to be the lender of last resort? (It couldn't be if it cannot create money. How can it create money? Because the Government tells it to.)
http://www.moslereconomics.com/wp-content/powerpoints/7DIF.pdf (pdf 65 pages) The Seven Deadly Economic Frauds
Graph compiled from the Office of National Statistics UK. Sectoral accounts.
This is basic history of money stuff. Going back to tally sticks. Chartalists, The State Theory of Money, Keynes, Minsky, even Greenspan!, National Accounting, GDP, Government deficit = Private Savings.
It's a basic accounting rule that if the Federal Reserve paid off all debts, there would be no private savings.
GDP = C + I + G + (X - M)
What enables the Federal Reserve to be the lender of last resort? (It couldn't be if it cannot create money. How can it create money? Because the Government tells it to.)
http://www.moslereconomics.com/wp-content/powerpoints/7DIF.pdf (pdf 65 pages) The Seven Deadly Economic Frauds
Graph compiled from the Office of National Statistics UK. Sectoral accounts.
TiredSam
Committee Member
Some might find this helpful:
Or for a bit more detail, this:
https://www.bbc.co.uk/programmes/b07wgmfd
Or for a bit more detail, this:
https://www.bbc.co.uk/programmes/b07wgmfd
Alvin
Senior Member (Voting Rights)
Some correct, lots of misinformation and a misunderstanding of how things work.
Also if someone wrecked something and someone else supposedly tried to make it worse how will voting for far worse then both improve things?
This is the problem with easy answers and misinformation, garbage in, even worse garbage out
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