Trustees for the government's two biggest benefit programs warned Tuesday that Social Security and Medicare are facing "enormous challenges," with the threat to Medicare's solvency far more severe.
The trustees, issuing a once-a-year analysis, said the resources in the Social Security trust fund will be depleted by 2041. The reserves in the Medicare trust fund that pays hospital benefits were projected to be wiped out by 2019.
Both those dates were the same as in last year's report. But the trustees warned that financial pressures will begin much sooner when the programs begin paying out more in benefits each year than they collect in payroll taxes.
The first year that payments will exceed income for Social Security will occur in 2017, just nine years from now, reflecting growing demands from the retirement of 78 million baby boomers. Medicare is projected to pay out more than it receives in income starting this year.
"The financial difficulties facing Social Security and Medicare pose enormous challenges," the trustees said in their report. "The sooner these challenges are addressed, the more varied and less disruptive their solutions can be."
Treasury Secretary Henry Paulson, one of the trustees, warned that the country was facing a fiscal train wreck unless something is done.
"Without change, rising costs will drive government spending to unprecedented levels, consume nearly all projected federal revenues and threaten America's future prosperity," Paulson said in releasing the new report. "Our nation needs a bipartisan effort to strengthen both programs for future retirees."
President Bush, who wanted to make overhauling Social Security his top domestic priority in his second term, tapped Paulson to lead that effort. However, Paulson has been unable to forge a consensus with Democrats, who took control of Congress in 2006.