NCPA - National Center for Policy Analysis


April 14, 2008

The coming challenge of paying Social Security, Medicare and Medicaid benefits will be one of the greatest economic challenges of the 21st century, says Brian Riedl, a Grover M. Herman Fellow at the Heritage Foundation.


  • The first of 77 million baby boomers have begun to collect Social Security and will soon start receiving Medicare and Medicaid Benefits.
  • The total cost of these entitlement programs will leap from 8.4 percent of gross domestic product to 18.6 percent of GDP by 2050; in comparison, the entire Federal Budget is 20 percent of GDP.
  • To cover these additional costs, Congress would need to raise taxes permanently by the equivalent of $12,072 per household or eliminate every other federal program.

Although aware of this coming crisis, Congress has largely ignored it because all of the possible reforms are considered politically risky, says Riedl:

  • Yet delays only increase the pain of the ultimate reforms, which are becoming about $1 trillion more expensive annually.
  • Furthermore, many believe that Americans ages 55 and over should be exempt from any reforms.
  • One-third of all baby boomers have already crossed that threshold, and at 4 million per year, all of them will have crossed it by 2019.

A first step in reforming the entitlement programs is addressing whether or not entitlement programs should always have first claim on tax dollars, leaving discretionary programs (e.g. defense, education, and veteran's health) to fight over the remaining scraps of the federal budget, say Riedl.

Source: Brian M. Riedl, "A Guide To Fixing Social Security, Medicare, and Medicaid," Heritage Foundation, March 12, 2008.


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