Unless Congress acts — and forcefully — payments to millions of Americans could be cut.
If the Social Security and Medicare funds ever become exhausted, the nation’s two biggest benefit programs would collect only enough money in payroll taxes to pay partial benefits. Social Security could cover about 75 percent of benefits, the trustees said in their annual report. Medicare’s giant hospital fund could pay 87 percent of costs.
“Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare,” the trustees wrote. “If they take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare.”
In reality there is no trust fund for Social Security and Medicare. Congress takes in tax dollars and puts in special IOUs into the trust funds. How is congress going to redeem these special IOUs to make benefit payouts in the future? Any redeeming comes from current tax income at the time. This makes the special IOUs effectively worthless. A real trust fund would be able to generate benefit payouts by selling assets such as bonds in corporations.
What did congress do with the tax dollars supposedly set aside in the trust funds? It spent it.