A major supply of bedtime reading became available on May 1 -- the annual trustees' reports on Social Security and Medicare. Clocking in at 226 and 219 pages respectively, the reports guarantee sleep for the innumerate. The reports may also cause nightmares among those who dare to think about what they read.
The figures in the reports are so beyond everyday experience that few will grasp their meaning. The trustees tell a nation that lives month to month on just-in-time financing that program costs will exceed revenues in 2017, more than 132 payments from now. They also tell us that the fabled Social Security trust fund will be exhausted in 2040. That may be a year earlier than last year's report, but face it: It's 34 television seasons from now. The numbers, page after page, are nearly inconceivable.
So let's start with a warm-up exercise, ExxonMobil. The largest and most valuable corporation in America, it also tends to measure things in billions. ExxonMobil has, yes, 6.05 billion shares outstanding. Multiply that by the recent $63.41 price, and the company has a market capitalization of $383.6 billion. It also has sales of $337 billion and, last year, had profits of $35 billion.
See what I mean? Big numbers. All, however, are smaller than the basic numbers for Social Security. It, for instance, had revenue of $702 billion in 2005 and made benefit payments of $521 billion.
Perhaps the only way to understand the size of Social Security and Medicare is to compare them to other government numbers. In fact, that doesn't work either.
The federal deficit is estimated to be about $423 billion this year, up from $318 billion last year. We worry about a number that size because (1) it is very, very large, (2) we have to borrow most of it from strangers, and (3) it will bring gross federal debt to over $8 trillion dollars.
Well, guess what? Those numbers are small relative to what you'll find in the Social Security and Medicare trustees' reports. The 2006 reports say the unfunded liabilities of Social Security increased by $600 billion. Medicare's unfunded liabilities ballooned a stunning $2.4 trillion. Mind you, that's the increase for the year. It isn't the total.
The total unfunded liabilities of Social Security now amount to $4.6 trillion. The unfunded liabilities of Medicare now amount to $32.1 trillion.
In 2005, the combined unfunded liabilities of Social Security and Medicare increased by $2.3 trillion, seven times larger than the official $318 billion federal deficit. In 2006, the combined unfunded liabilities of the two programs increased by an additional $3 trillion. Again, the increase was seven times larger than the estimated $423 billion federal deficit.
Over the last two years, while politicians argued over spending on Iraq, the cost of gasoline, and elimination of the estate tax, the unfunded liabilities of our two most important social programs have risen by $5.3 trillion. That's more than the $5 trillion of federal debt that is publicly held and traded. In two years.
At the moment, these two worlds of big numbers -- official US government debt and growing obligations of Social Security and Medicare -- seem unrelated to each other, like separate worlds.
In fact, those worlds will collide. And it will happen long before 2040.
Scott Burns is a columnist for the Dallas Morning News. E-mail questions to email@example.com; fax to 214-977-8776; or mail to Scott Burns, Dallas Morning News, Box 655237, Dallas, TX 75265.