Saturday, June 1, 2013

Trustee Reports on Medicare And Social Security

The Trustee reports show that Social Security and Medicare costs will rise over time in relation to GDP.  Social Security expenditures are in line with predictions made in the 1980's when the payroll tax was created to provide a surplus that would be used to pay for future expenditures.  It is completely untrue to say that Social Security is facing bankruptcy.  Over time Medicare costs as a share of GDP will rise faster the cost of Social Security.  Eventually, it become a larger share of GDP than Social Security.  That is primarily due to growth in medical expenditures per beneficiary.  The percent of GDP consumed by the these programs is also due to a more moderate rate of GDP growth.  The lower growth rate in GDP is a function of slowing population growth.  The size of the labor force and the productivity rate are the most important determinants of GDP growth. 

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