WASHINGTON—The Trump-GOP $1.5 trillion tax cut for corporations and the rich not only gives them a financial windfall. It also dims the financial future of two programs, Social Security and Medicare, that millions of people rely upon, the head of the Alliance for Retired Americans says.
And that’s important because the latest report of the trustees of Medicare and Social Security shows the balance in Medicare’s hospital insurance trust fund in particular is closer to running out than it has been before. That date is now 2026, compared to 2029 in last year’s report. Tax revenues in 2026, however, would still cover 90 percent of the hospital fund’s payments.
“The economic growth promised when the tax bill passed is not expected to manifest,” Richard Fiesta, Executive Director of the Alliance for Retired Americans, e-mailed. “The GOP policies are hurting the economy, leading to lower overall payroll tax revenue. That reduces the number of years that full Social Security and Medicare benefits can be paid.”
The key word there, for both Medicare and Social Security is “full.” When the trust funds are exhausted, yearly payroll tax revenues can still cover most of the two programs’ expenses, the trustees reported.
“The 2017 tax law also repealed the Affordable Care Act’s individual mandate, causing millions to lose their health insurance. Many of those people are older Americans who are now forced to seek treatment at hospital emergency rooms, adding to Medicare’s expenses,” Fiesta warned.
Medicare’s expenses will also increase because Congress barred Medicare – which, with Medicaid, pays almost half of U.S. health care costs – from negotiating lower prescription drug prices with companies.
The trustees – three Trump administration Cabinet officers and his director of the Center for Medicare and Medicaid Services – issued the report, but none were around to explain its findings. One of them, Treasury Secretary Steven Mnuchin, claimed the growth unleashed by Trump’s tax cut, plus higher federal spending, would keep the trust funds for the two big programs solvent.
“The trustees now project Old Age, Survivors and Disability Insurance (trust fund’s) annual cost will exceed total income beginning in 2018 — four years earlier than projected in last year’s report — and continuing throughout the projection period,” the trustees wrote about Social Security.
“If no changes are made, the trust fund reserves would be drawn down until they are depleted in 2034 — the same year as estimated in the last three reports. After trust fund reserve depletion, continuing income would be sufficient to pay 79 percent of program cost, declining to 74 percent for 2092.”
Fiesta wasn’t alone in disagreeing with Mnuchin’s rosy assessment. Senate Minority Leader Charles Schumer, D-N.Y., tweeted his criticism, which was in the same vein.
“As the Trustees’ report shows, the #GOPTaxScam is already robbing & weakening Medicare & Social Security to cover tax breaks for the wealthy & biggest corps. Despite @realDonaldTrump’s campaign promises, the GOP policies will strip away the benefits America’s seniors earned,” he tweeted.
Fiesta said, however, that Social Security is solvent enough, as shown by the trustees’ figures, to argue for a benefit increase. It could be paid for by eliminating the cap on income subject to Social Security and Medicare payroll taxes, he noted. “Scrap the cap,” is a frequent theme of the programs’ most-consistent defender, Sen. Bernie Sanders, Ind.-Vt.
“Social Security becomes a more important part of millions of American families’ retirement plans every year,” Fiesta said. “We call on our elected leaders to safeguard and expand Social Security benefits, provide a more accurate formula for cost-of-living adjustments, and lift the cap on earnings for the wealthiest Americans.”
“Sixty-six percent of voters are more likely to back candidates who support expanding and increasing Social Security benefits, compared to only 18 percent who are less likely.”
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