Question

When combined, between now and 2035, the annual underfunded amounts of Social Security and Medicare will?

a) grow from 1% to 4.5%.
b) fall from 4.5% to 1%.
c) remain at about 14%.
d) fall from 30% to 14%.

Answer 1

The underfunded amounts of Social Security and Medicare are projected to rise from 8.3% of GDP in 2009 to about 13% by 2035 and about 20% in 2080. Options for addressing the underfunding include increasing taxes, cutting other spending, raising the retirement age, or running large budget deficits.

Step-by-step explanation:

The long-term projections from the Congressional Budget Office in 2009 indicate that Medicare and Social Security spending combined will rise from 8.3% of GDP in 2009 to about 13% by 2035 and about 20% in 2080. Without any corresponding rise in tax collections, some mix of changes will need to occur to address the underfunded amounts.

Options for addressing the underfunding include:

1. Taxes will need to increase dramatically to generate more revenue to support the growing spending on Medicare and Social Security.
2. Other spending will need to be cut dramatically to reallocate funds towards Medicare and Social Security.
3. The retirement age and/or age of receiving Medicare benefits will need to increase to reduce the number of people eligible for these programs.
4. The federal government will need to run extremely large budget deficits to cover the underfunded amounts.