That's what I was getting at. If it had been run responsibly as an insurance scheme, it might have worked, but Democrats spent it all?
What would one have, had that $55,000 been invested in t-bills over 30 or 40 years? I don't know.
Not really. Even if the trust funds for SS and Medicare contained real assets instead of IOUs in the form of non-market, interest bearing T-bills, it still would not be enough to fund the programs. It is an actuarial problem. The revenue is insufficient to pay the benefits.
In 1950 there were 16 workers for every retiree, today there are 3 and by 2030 there will be two. People are living longer and medical costs are increasing faster than inflation. The premiums are not tied to benefits. And as I mentioned previously, the premiums for Medicare Parts B and D only pay for 25% of the costs, by law. The General Fund must come up with the rest to pay benefits. Hence we have a problem where Medicare will consume the entire federal budget unless it is reformed. It is unsustainable. We spent $222 billion out of the FY 2011 budget (read General Fund) to pay for Medicare Parts B and D. Those costs will continue to go up as 10,000 people a day reach 65 for the next 20 years. By 2030 one out of every 5 people in this country will be 65 or older--twice what it is now.
As bad as that is, however, Social Security's problems are trivial compared to Medicare's. Its trustees also issued a report this week. On page 69 we see that just part A of that program, which pays for hospital care, has an unfunded liability of $36.4 trillion in perpetuity. The payroll tax rate would have to rise by 6.5% immediately to cover that shortfall or 2.8% of GDP forever. Thus every taxpayer would face a 28% increase in their income taxes if general revenues were used to pay future Medicare part A benefits that have been promised over and above revenues from the Medicare tax.
But this is just the beginning of Medicare's problems, because it also has two other programs: part B, which covers doctor's visits, and part D, which pays for prescription drugs.
The unfunded portion of Medicare part B is already covered by general revenues under current law. The present value of that is $37 trillion or 2.8% of GDP in perpetuity according to the trustees report (p. 111). The unfunded portion of Medicare part D, which was rammed into law by George W. Bush and a Republican Congress in 2003, is also covered by general revenues under current law and has a present value of $15.5 trillion or 1.2% of GDP forever (p. 127).
To summarize, we see that taxpayers are on the hook for Social Security and Medicare by these amounts: Social Security, 1.3% of GDP; Medicare part A, 2.8% of GDP; Medicare part B, 2.8% of GDP; and Medicare part D, 1.2% of GDP. This adds up to 8.1% of GDP. Thus federal income taxes for every taxpayer would have to rise by roughly 81% to pay all of the benefits promised by these programs under current law over and above the payroll tax.