NCPA - National Center for Policy Analysis

Entitlements Are Bankrupting the Federal Government

March 31, 2011

The U.S. government is about to exceed its statutory debt limit of $14.3 trillion.  But that actually underestimates the size of the fiscal time bomb that this country is facing.  If one considers the unfunded liabilities of programs such as Medicare and Social Security, the true national debt could run as high as $119.5 trillion, says Michael D. Tanner, a senior fellow with the Cato Institute.

Moreover, to focus solely on debt is to treat a symptom rather than the underlying disease.  

  • We face a debt crisis not because taxes are too low but because government is too big.
  • If there is no change to current policies, by 2050 federal government spending will exceed 42 percent of gross domestic production (GDP).
  • Adding in state and local spending, government at all levels will consume nearly 60 percent of everything produced in this country.

Driving this massive increase in the size and cost of government are so-called "entitlement programs," in particular Social Security, Medicare and Medicaid.

  • Indeed, by 2050, those three programs alone will consume 18.4 percent of GDP.
  • If one assumes that revenues return to and stay at their traditional 18 percent of GDP, then those three programs alone will consume all federal revenues.

Therefore any serious attempt to balance the federal budget and reduce our growing national debt must include a plan to reform entitlements, says Tanner.

Source: Michael D. Tanner, "Bankrupt: Entitlements and the Federal Budget," Cato Institute, March 28, 2011.

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