NCPA - National Center for Policy Analysis


June 24, 2008

We constantly hear about the cost of earmarks and the Iraq War, but we hear nothing about "entitlements" -- the government's ironic term for programs that transfer money from people who earned it to people who didn't.  Today's big problem with entitlements is that their growth will soon eat everything in the federal budget, says 20/20 host John Stossel. 

Last month, the Congressional Budget Office (CBO) analyzed the growth of government spending and deficits for Rep. Paul Ryan (R-Wis.), ranking member of the House Budget Committee. 

According to the CBO report:

  • Spending on Medicare, Medicaid and Social Security, which in 2001 represented about 8 percent of gross domestic product (GDP), would balloon to 14.5 percent in 2030 and 25.7 percent in 2082.
  • When all other spending, including interest on the debt, is included, federal spending would eat up an astounding 75.4 percent of GDP in 2084.
  • If taxes don't keep pace, additional spending will eventually cause future budget deficits to become unsustainable.
  • For taxes to keep pace, the CBO says tax rates would have to more than double.

One alternative to raising taxes would be to cut other spending, says Stossel.  But at current spending-growth rates for Social Security, Medicare, and Medicaid, all other spending would have to be reduced to zero in 2045, which is highly unlikely.

Fortunately, says Stossel, Rep. Ryan is proposing a comprehensive and detailed bill that would:

  • Give individuals tax credits with which to buy their own health insurance in a competitive national marketplace.
  • Let the states have flexibility in running Medicaid.
  • Give workers under the age of 55 money to buy insurance rather than rely on Medicare when they retire.
  • Permit younger workers to invest up to a third of their Social Security taxes in private accounts.
  • Increase the retirement age.
  • Temper the growth in Social Security benefits.

Source: John Stossel, "Congress Still Ignores Entitlement Monster," Human Events, June 16, 2008.  


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