As I was saying
Taking on entitlements
Slowly but surely, folks in Washington, D.C., are beginning to understand the crushing effect entitlement programs administered by the federal government are having on our economy. More important, they are beginning to understand the most dangerous thing they can do is nothing: Failure to act simply postpones—and worsens—some staggering problems.
Consider, for example, some realities:
- Social Security, Medicare and Medicaid cost about $1.6 trillion per year. In 10 years, their collective cost will be $3 trillion.
- Mandatory spending—entitlement programs and interest on the national debt—already exceeds all federal income tax revenues collected.
- An average of 10,000 people are retiring every day—and will continue to do so for the next 17 years.
- Not a single major entitlement program is projected to be financially solvent 20 years from now.
There are two demographic forces driving the problem. First, we are living longer and receiving better health care. And second, we are having fewer children, which means, relatively speaking, there are fewer workers paying into the system compared with the number of beneficiaries.
The problem, of course, is few politicians want to address the issue; mentioning Social Security reform can lead to campaign ads showing a helpless grandmother being thrown off a cliff. But the issues must be addressed. Social Security had a cash flow deficit of $58 billion in 2012; Medicare's annual cash shortfall in 2011 was $288 billion. And each dollar paid into Medicare ultimately translates to about $3 in benefits.
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