AMERICA IS FACING WELL-DOCUMENTED ISSUES with Social Security and Medicare stemming from a combination of an aging population and expensive new medical technology, among other factors. While both of
these programs can currently pay benefits from positive balances, long-term projections made annually by
the trustees of the Social Security and Medicare trust funds show that they face threats of reserve depletion.
Such projections have prompted Congress and the Obama administration to propose corrective actions to
avoid adverse consequences for the nation.
The process used to examine long-term financial viability
of these critical social programs is an example of a successful
mechanism to identify and warn of serious problems. This examination allows public policymakers to take gradual, moderate
corrective action that will result in far less economic disruption
than abrupt emergency action would when a crisis is imminent.
Indeed, significant changes have been made based on projections of costs decades in the future involving many assumptions
and complicated models. For example, the 1983 amendments
to the Social Security Act that were signed into law by Ronald
Reagan increased the Social Security tax rate in stages from
10. 7 percent in 1981 to 12. 4 percent beginning in 1990. This tax
The United States faces
a serious economic
disruption from higher
sea levels unless action
is taken soon.