Foundations

Key Points

1. Entitlement spending is driving all of the growth in federal spending.
2. Entitlements face a fiscal shortfall – those with contributory taxes do not bring in enough revenue to cover their future cost.
3. Unless Social Security and Medicare are put on a sound fiscal path, there is no hope for long-run affordability.
4. Failing to restrain to spending will lead to higher taxes, fewer available services, and slower economic growth.

How To Think About Entitlement Reform

• The United States faces a fiscal challenge unlike any in its history, driven entirely by spending on federal entitlement programs.
• The United States is borrowing half a trillion dollars a year it doesn’t have. In ten years, it will have to borrow a trillion dollars a year.
• Social Security, Medicare, and interest payments against the debt are the three fastest growing large expenditures.
• Social Security and Medicare do not bring in enough revenue to cover their costs.
• Reforming Social Security will require benefit cuts for future retirees.
• Reforming Medicare starts with gradually transforming it into a true insurance program that offers greater financial protection against the high cost of catastrophic illness.
• Reining in federal spending has to happen immediately.