WASHINGTON - Social Security will begin paying out more in benefits than it receives in taxes in 2017, twelve years from now and a year earlier than previously estimated, trustees said Wednesday in a forecast adding fuel to the debate over changes President Bush wants.
The trustees estimated that the program, which is about to be inundated with baby boom retirees, would go broke in 2041, also a year earlier than in their previous annual report. After then, benefits would have to be cut by more than 25 percent if payroll taxes aren't increased.
The Bush administration said both findings underscored the urgency of its effort to overhaul Social Security this year, in part by creating retirement investment accounts for younger workers. Democrats said the trustees' report undercut the president's efforts to portray the program as in immediate crisis.
That label would appear to apply to Medicare, the health care program for the elderly and disabled. The trustees, who also oversee that Great Society program, noted that Medicare began paying out more in benefits than it received in taxes as of last year. They also predicted it would go broke in 2020, one year later than they estimated in 2004, but more than two decades before Social Security.
"The numbers leave nothing to doubt about the financial condition of the Social Security system," Treasury Secretary John Snow, chairman of the six-member trustees' board, said during a news conference. "The report underscores the fact that we need to do something."
Mike Leavitt, the new Health and Human Services secretary and another trustee, said that Medicare and Medicaid - the health insurance program for the elderly at the state level - face daunting financial problems.
The trustees estimated that the premiums Medicare beneficiaries pay for doctor visits will increase about 12 percent next year - from $78.20 a month now to $87.70 in 2005. This year's premiums are 17 percent above what they were in 2004.
Leavitt said the administration had begun to address Medicare in 2003 with new performance standards for doctors, as well as programs that encourage better health through things as simple as an annual physical.
Senator Harry Reid of Nevada, the top Democrat in the Senate, disagreed with Snow, declaring, "Today's report confirms that the so-called Social Security crisis exists in only one place: the minds of Republicans."
Reid also argued that enacting the key feature of the president's proposal - allowing younger workers to invest up to 4 percent of their income subject to Social Security taxes - would make the fund insolvent in 2030, some 11 years earlier than the trustees projected.
Snow branded Reid's former statement as "counterfactual," noting that the first of the 78 million baby boomers will begin to retire in 2008, accelerating benefit payments while reducing the number of workers paying into the system.
White House spokesman Trent Duffy also brushed off the 2030 estimate, saying, "President Bush wants to save Social Security permanently so that date never comes."
The trustees said Social Security's unfunded obligations total $4 trillion over the next 75 years, an increase from last year's projection of $3.7 trillion.
Bush has said he will not raise the current 12.4 percent payroll tax to deal with the funding problem, but he has said he would consider raising the $90,000 cap on income subject to the payroll tax.
In the report, the trustees said of proposed changes, "The sooner adjustments are made, the smaller and less abrupt they will have to be."
The report said in 2041, the new date for Social Security's insolvency, payroll taxes will be generating enough income to cover 74 percent of benefit payments. That represents a slight increase from last year, when the trustees estimated that 73 percent of benefits would be covered in the year that the trust fund went broke.
Social Security provides retirement, survivors and disability income for 47.6 million Americans, while Medicare provides health care for 41.7 million seniors and disabled people.