The Congressional Budget Office (CBO) releases a report every year on the “health” of the largest benefit programs in U.S. In 2011, the CBO analyzed the budget deficit for Medicare and concluded that the program would run out of money by 2024. In 2012, the CBO maintained that 2024 projection. The study noted that the U.S. government is doing everything it can to keep health costs in line, which is the reason why the 2024 doomsday timeline was not moved up. The report warns that medication, doctors’ pay and new medical equipment continue to rise in cost, which could worsen the budget deficit and so move up the doomsday timeline. The news is much worse when it comes to Social Security. In 2011, the CBO stated that Social Security would run out of money by 2038. In 2012—from the report released last week—the CBO now says money for Social Security will run dry by 2035 – three years earlier thanks to a deteriorating budget deficit! The major reason why the budget deficit for Social Security worsened was that the payouts were 3.6% higher than projected due to the fact that pensioners are compensated each year for the change in the rate of inflation, as reported by the Consumer Price Index (CPI). Since the payout was larger and taxes did not increase, the budget deficit widened. What could disrupt this projection completely is the budget deficit for the disability program within Social Security. In 2011, the CBO said it was set to be emptied by 2018. In the CBO’s report released last week, the disability program is now set to run out of money by 2016! The main culprit behind this rise in the budget deficit for the disability program was many more disabled people losing their jobs and, therefore, with this economic slowdown, having no choice but to apply for benefits. Medicare and Social Security are supported by both employers and employees through taxes. Of course, with the economic slowdown, government revenues have decreased, since fewer people work, worsening the budget deficit. The government has to spend more money in order to maintain support for Medicare and Social Security, which will ensure that the budget deficits of $1.3 trillion for the U.S. government for the current year will not only be maintained, but will continue to worsen. Watch out for that stock market rally, dear reader, it is assuming that the economic slowdown will let up and the budget deficits will not worsen—neither event of which I see happening anytime soon. Michael’s Personal Notes : What the CBO is not taking into account in its deteriorating projections for the budget deficits in Medicare and Social Security …