WASHINGTON -- The recession caused no damage to the financial health of Social Security and Medicare, trustees reported Tuesday, but they said Congress still needs to act quickly to shore up the programs before baby boomers reach retirement age.
The projected insolvency date of the Medicare trust fund was extended to 2030 barring changes, a year later than earlier estimates. Social Security is expected to run out of cash by 2041, three years later than estimated earlier, trustees said in their annual report.
"This reprieve provides little comfort as the programs continue to face substantial financial challenges in the not-too-distant future that need to be addressed at the earliest opportunity," said Treasury Secretary Paul O'Neill, one of the trustees for the two programs. "The longer we wait the more difficult our choices will be in the future."
Trustees also projected Social Security will begin to dip into its trust funds a year later, in 2017, when it would be paying out more in benefits than collecting in payroll taxes. Medicare's year for dipping into its trust fund stayed at 2016.
"The economy has weathered a relatively brief and mild recession," Lynn Reaser, chief economist for Banc of America Capital Management, said before the update. "As a result, the overall revenue sources for Medicare and Social Security out 15 or 30 years have not been impacted significantly."
Same long-term outlook
Still Reaser cautioned, "The point remains that at some time both of these trust funds will be out of money."
House Majority Leader Dick Armey, R-Texas, said, "While the short-term outlook has improved a little, the long-term outlook is still the same. The current program simply cannot sustain the impending wave of retiring baby boomers."
Over the past several years, the strong economy has helped to extend the time before either trust fund is expected to run out of cash.
Last year, the trustees' report found that the Medicare trust fund would not be exhausted until 2029, four years later than earlier estimates, under current policies and conditions. The report found that the Social Security trust fund would not run out of cash until 2038, a year later than earlier estimates.
But the gains, as Reaser noted, don't hide the fact that both Medicare and Social Security are ill-prepared to deal with the baby boomer population, which is moving closer to retirement age.