Social Security, Medicare Funds at risk even before pandemic: report

Annual reports out from the government indicate that Medicare is expected to become insolvent in just six years, while Social Security will be unable to pay full benefits starting in 2035. Yahoo Finance's Rick Newman joins Jen Rogers, Myles Udland, Andy Serwer, and Akiko Fujita to discuss.

Video Transcript

JEN ROGERS: So, Rick, Andy had a story on media and how it's faring through coronavirus, which is not very good. And that's sort of been a theme we've seen-- some of the strongest getting stronger, some of the weak are getting hit here. And that actually applies to the government as well. We've got a new report out from the government on Medicare and Social Security, which, again, before coronavirus, were not doing well. Is the picture that much bleak, and does it have anything to do with the crisis?

RICK NEWMAN: Yeah, we're going to have problems with Medicare soon. This has been a distant problem for a long time. Yes, it's going to run short of money, but we'll deal with it when we get there. So the trustees for the government who oversee these two programs, once a year, they put out the financial status of these two programs. Social security is OK until the 2030s. So it's got about 15 years until it runs into financial trouble. Medicare is going to start running short of money in six years.

And that analysis was done before any of the coronavirus pandemic had come on the scene. So this does not account for any of the job loss, the foregone revenue, the spiraling, mushrooming budget deficits we're already seeing. So the analyst-- you know, outside analysts who look at this say this picture is going to be way worse when they do the report next year. So by 2021, we may be hearing that Medicare is about to run out of money by 2023 or 2024-- just two or three years from now.

And when it runs short of money, that doesn't mean, Medicare is completely broke. That means it just cannot fund benefits at 100%. It starts to fund them at-- you got that right, Andy, I see you putting some cash up to the--

ANDY SERWER: I got some money.

JEN ROGERS: We just had all this stimulus, and we've been able--

RICK NEWMAN: Not everyone.

[INTERPOSING VOICES]

JEN ROGERS: [INAUDIBLE] To run out of money.

RICK NEWMAN: Yeah, so what's going to-- there are two ways to solve the problem. Either you raise the taxes that cover Medicare, or you cut benefits. And that's what Congress is going to be faced with in a very short period of time.

MYLES UDLAND: The third way is you print the money. We can't run out. It's fine. This is--

RICK NEWMAN: You can do that too, I guess.

MYLES UDLAND: This is an imaginary conversation.

JEN ROGERS: Rick, you got to tune in for our MMT conversations.

ANDY SERWER: Oh.

RICK NEWMAN: What-- are they on air? Or are these just--

JEN ROGERS: Yes, they're on air. We've had lots of guests come out. We are-- we can run deficits way higher than what we're doing right now.

RICK NEWMAN: Luckily, we now have disinflation and possibly deflation. So maybe we can.

JEN ROGERS: We are-- we're going to find out.

RICK NEWMAN: It's a great time to be alive. That's all I know.

ANDY SERWER: It's a weird little club they have, Rick.

RICK NEWMAN: I'm aware.

JEN ROGERS: You guys can be members too.