The Social Security and Medicare Funding Problems Are Real 

September in Washington means lawmakers scrambling to keep the government’s doors open. On-time funding has become a pathological exercise in procrastination. This annual show of Congressional dysfunction is both a reflection of a broken budget process and a symbol of our dismal fiscal situation. 

This will likely mark the 29th year Congress failed to pass all its appropriations bills before the fiscal year begins on October 1. Instead, lawmakers will likely approve a “continuing resolution”—an extension of last year’s funding level—or perhaps will even shut the government down. 

If the past is prologue, it will take until December or January—already one-quarter into the fiscal year—before there’s an agreement to set federal funding levels. Congress may even forgo the task of budgeting for this upcoming fiscal year altogether (as they did for fiscal year 2025) by passing a continuing resolution for a year. 

Budgeting is a basic task of governing, and yet the federal government seldom does it. The 2025 federal budget consists of about $7 trillion in spending and $5 trillion in taxes, leaving a nearly $2 trillion hole filled by borrowing. Most of this spending—$5-trillion-plus—is automatic or “mandatory,” and is spent on transfer and entitlement programs like Social Security and Medicare, the two largest programs in the federal budget, as well as Medicaid, nutrition benefits, other income security measures, and interest on the debt. Only about one-fourth of the federal budget is “discretionary” spending on government operations, including national defense, homeland security, research, and education. 

Most of the budget and all federal tax revenues are not subject to regular legislative review, and when it is reviewed, Congress often makes our fiscal problems worse, not better. For instance, the “One Big Beautiful Bill Act” included more than $1 trillion of net spending cuts but also $4.5 trillion of net tax cuts. The law adds more than $4 trillion to the debt with interest over the next decade. 

While the president’s aggressive tariffs might offset some of that increase—assuming the courts don’t overturn them—levies on imported goods won’t cover all the costs. Worse yet, Congress did nothing in the new law to address our unsustainable fiscal problems, which will continue to worsen in the coming years. 

Our fiscal situation has deteriorated significantly since we balanced the budget a quarter-century ago. The national debt held by the public—the sum of annual deficits since our nation’s inception and economists’ preferred measure of debt—is now equal to the size of the entire U.S. economy. The last time the debt was this high was just after World War II, and it quickly came down as wartime borrowing ended and the economy normalized; this time, debt is only projected to go up. We spend more on interest payments on that national debt—nearly $1 trillion annually and growing—than on priorities like defense or Medicare. Interest payments are second only to Social Security. And the trust funds we use to finance Social Security and Medicare benefits are on their way to insolvency in just seven years, resulting in drastic across-the-board cuts unless Congress takes action. 

How did we get into this mess? Most of our current deficit and future funding problems come from a familiar problem—Social Security and Medicare cost more as the population ages and health care costs grow. To make things worse, lawmakers have routinely cut taxes and increased spending elsewhere rather than address these programs’ spending growth or lack of dedicated revenue. Since 2001, Congress has passed several large tax cut laws, including the 2001 and 2003 Bush tax cuts (which were extended temporarily in 2010 and then permanently in 2012), the 2017 Trump tax cuts, and, most recently, the extension and expansion of the Trump tax cuts.  

Most of those tax cuts were bipartisan, with just the 2003 Bush tax cuts and both Trump tax cuts enacted on largely party-line votes. Congress has also increased spending significantly–all of which was also bipartisan—to go towards Medicare expansions, including creating the Part D prescription drug program, and discretionary spending, including for the wars in Iraq and Afghanistan. Both tax cuts and spending increases, plus the large fiscal response necessitated by the Great Recession and COVID-19 pandemic, resulted in our near-record-high debt today. Had all tax cuts and spending hikes over the last quarter-century been fully paid, our debt would be paid off. Instead, it’s exploding. 

So where do we go from here? Congress can start by funding the government without increasing our projected borrowing. Since the One Big Beautiful Bill Act allocates more money to both defense and nondefense priorities, the upcoming appropriations agreement might even reduce spending to cover needs that are already funded. Additionally, Congress should cap discretionary spending for 2026 and future years to slow spending growth and to force responsible budgeting. Importantly, they should avoid attaching unpaid-for measures—anything unrelated to appropriations should be fully paid for with offsetting tax increases or spending cuts; ideally, we should fund those items more than fully to begin reducing our borrowing. 

But that’s a small step toward solving our bigger problems—too little revenue for too much spending. A good goal would be to cut yearly borrowing to around 3 percent of the economy (about half of what we’re borrowing now)—a level supported by figures as different as former President Obama and Treasury Secretary Scott Bessent. That involves raising revenue in pro-growth ways, not overly discouraging work or investment. It also means addressing Social Security and Medicare and aligning the trust funds’ costs with their finances. We should trim anywhere else in the budget to find efficiencies and extract savings. 

After lawmakers negotiate this year’s funding, they should stop lurching from crisis to crisis and solve our nation’s fiscal problems—before they become the next crisis. 

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