NCPA - National Center for Policy Analysis


January 19, 2007

There's a tsunami on the horizon -- and it's heading our way.  This tsunami is a financial one that threatens to bankrupt our children. The "perfect storm" has been created by the convergence of the promises our government has made through the Big Three entitlement programs: Medicare, Medicaid and Social Security, says Rebecca Hagelin, vice president of the Heritage Foundation.


  • If policymakers in Washington do nothing and the deficit keeps rising, then by 2027 the Big Three (plus the resulting interest on the debt) will consume the entire U.S. budget; that means there will be nothing left for defense, infrastructure, or anything else.
  • Every child in this country already is already on the hook to pay off the equivalent of a $187,000 mortgage -- but with no house attached; that's how much each young person will have to pay in taxes just to provide promised Medicare, Medicaid and Social Security benefits to their elders.

Stuart Butler and Alison Fraser, two domestic policy experts at the Heritage Foundation, refer to this as "an entitlement spending tsunami" in an alarming new paper that outlines the dangers inherent in this approaching storm:

  • Tax levels over the last 50 years or so have hovered around 18 percent of gross domestic product (GDP).
  • Under current law -- that is, if President Bush's tax cuts expire and the Alternative Minimum Tax (AMT) isn't fixed -- that level will spike to 24 percent; that's well above the highest levels the nation has ever experienced.

Source: Rebecca Hagelin, "Dodging the Perfect Storm,", January 19, 2007.


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