Rose-Colored Calculators


Advocates of Medicare and Social Security reform have long complained that fuzzy accounting makes the programs appear to be more fiscally sound than they are. The trustees of both programs focus on the average actuarial balance over time, assuming that future surpluses in some years will cancel out deficits in others. On that optimistic assumption, the average projected actuarial imbalance over 75 years is a relatively manageable 2 percent of gross domestic product (GDP).

But as an October report by the nonpartisan Congressional Budget Office (CBO) documents, this approach is misleading. "For 2003, the trustees project a combined surplus for Social Security and Hospital Insurance of 1.94 percent of taxable payroll," the report says, "but for 2075, they project a deficit of 14.14 percent of taxable payroll." By then, the CBO projects that the two programs together will consume 16 percent of GDP, more than double the current level.

Graph: Projected Costs of Social Security and Medicare as percentage of GDP

(not available online)