Transcript Facing America’s Long-Term Budget Challenges

Facing America’s Long-Term
Budget Challenges
Brian Riedl
Grover M. Hermann Fellow for Federal Budgetary
Affairs
The Heritage Foundation
Washington Now Spends $24,106 Per Household
Inflation-Adjusted Dollars
$25,000
$23,000
$21,000
$19,000
$17,000
$15,000
1990
1992
1994
1996
1998
2000
Fiscal Year
2002
2004
2006
The Long-Term Problem

77 Million Retiring Baby Boomers

Ratio of workers supporting each retiree:
 1960 – 5-to-1
 2007 – 3-to-1
 2030 – 2-to-1

A Married Couples’ Burden in 2030

Rising Health Care Costs

Medicaid Affected Too
Social Security, Medicare, and Medicaid Costs As
a Percent of GDP
19.0%
20%
18%
15.2%
16%
% of GDP
14%
12%
2.8%
8.7%
10%
8.6%
6.4%
8%
1.5%
6%
3.0%
4%
2%
4.0%
4.2%
Social Security
6.0%
6.4%
2030
2050
0%
2006
Medicaid
Medicare
Option 1: Tax Increases
Per Household & Translated Into Today’s GDP
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2007 2011 2015 2019 2023 2027 2031 2035 2039 2043 2047
Fiscal Year
Option 2: Other Program Cuts
% of Federal Budget
Yearly Budget Breakdown, Assuming No Tax Hikes or Budget
Deficits
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
All Other
Programs
Social Security,
Medicare,
Medicaid,
and Net Interest
on Earlier Debt
2006 2010 2014 2018 2022 2026 2030 2034 2038 2042
Fiscal Year
Option 3: Continue Current Policies
And Cover Shortfalls With Budget Deficits
80%
Federal Spending as a % of GDP
70%
60%
50%
40%
Net Interest
30%
Medicare
20%
Medicaid
Social Security
Defense
Other
10%
0%
2000
2010
2020
2030
Fiscal Year
2040
2050
Option 4: Modernize Social Security, Medicare,
and Medicaid

Reform is the only way to avoid the scenarios listed
above. Delays only push up the final reform costs.

Long-Term Budgeting with Caps

Target Benefits to Needy

The Unaffordable Medicare Drug Entitlement
Conclusion

More Than Just Economics

Moral Questions of Generational Burdens and
Fairness

The Burden Facing Today’s Young Workers