More from John Cogan
The United States faces a fiscal challenge unlike any in its history, driven entirely by spending on federal entitlement programs. The country is currently borrowing half a trillion dollars a year and is on pace to borrow a trillion dollars every year. Unless entitlement spending is restrained, every American will face higher taxes and lower standards of living.
Entitlement programs fulfill the normal human desire to help those who cannot help themselves. But we must always remember that they also impose a penalty on work, because benefits have to be phased out as income rises. It is important to balance benefits granted and costs imposed.
Many people believe Social Security and Medicare are fully funded by payroll taxes. In reality, both programs are increasingly relying on regular tax revenue and ultimately more federal debt to stay afloat. Unless both programs are put on sustainable fiscal path, their ongoing expansion will crowd out all other government spending.