What Every American Needs to Know About Government Entitlement Reform

Abstract

The long-term budget challenge can be summarized in one word: entitlements. Without Social Security, Medicare, and Medicaid, the budget would be roughly in balance over the coming decades. Left unreformed, however, entitlement costs will become so wildly out of step with revenues that a fiscal crisis will be inevitable. Balancing the budget over the next twenty-five years would require an immediate and permanent 30 percent increase in all federal taxes. Over longer periods, the prognosis is even grimmer. The alternative is to rethink the entitlement philosophy by focusing resources where they are most needed, sharpening incentives to reduce waste, empowering individuals to make choices, and buttressing Americans’ own retirement savings.

Keywords: Entitlement, Social Security, Medicare, Medicaid, Budget

JEL Classification: H63, H53