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The annual reports for 2011 from the trustees of Medicare and Social Security are in and we’ll get to your first question immediately: Social Security runs out of money in 2036. Medicare runs out of money in 2024. Both assertions are meaningless. But they are actuarially true (assuming that the underlying assumptions are correct) and they’re fun facts for cocktail parties.Whenever we examine overwhelming data overwhelmingly released, we defer to Bruce Bartlett and Keith Hennessey, two men who write clearly about complicated budget matters. Mr. Bartlett has a very good column on the Social Security and Medicare trustee reports, which you can read in full by clicking here. But the 10 second version of the “challenge” ahead is captured neatly in two sentences by Bartlett:
Thus we see that Social Security and Medicare are underfunded relative to promised benefits by $56.4 trillion or 3.8 per cent of G.D.P. per year forever. To put these programs on a sound footing, federal income taxes would have to rise from 6.2 per cent of G.D.P. to 10 per cent, an increase of 61 per cent.
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