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Entitlement Spending Will Nearly Double by 2050
by Alison Meyer  
May  6, 2012 

Spending on Medicare, Medicaid, Social Security, and the Obamacare subsidies will soar as 78 million baby boomers retire and health care costs climb. Total spending on federal health care programs will more than double. Future generations will be left with an untenable debt burden. 

President Obama has called Rep. Paul Ryan’s budget “an attempt to impose a radical vision on our country,” but as this week’s chart illustrates, if something radical doesn’t happen, entitlement spending will nearly double by 2050. The amount of spending on Medicare, Medicaid, Social Security and Obamacare subsidies will soar over the next 38 years, leaving future generations with an alarming debt burden. 

Congressional Budget Office predictions show that in 2010 entitlement spending attributes 10.3 percent of GDP, then jumps to 19 percent of GDP by 2050. David John, Heritage’s senior research fellow in retirement Security and financial institutions, explains why in the context of last week’s Social Security trustees report: 

The April 23 report shows that all people who receive Social Security benefits face about a 25 percent benefit cut as soon as 2033—three years earlier than predicted in last year’s report. The program’s long-term deficit is now larger than it was before the 1983 reforms. In order to pay all of its promised benefits, Social Security would require massive annual injections of general revenue tax money in addition to what the program receives from payroll taxes. 

Starting in 2010, Social Security began to permanently spend more than it takes in. From now on, Social Security will require large and growing amounts of general revenue money in order to pay all of its promised benefits. Even though this money will come technically from cashing in the special-issue bonds in the trust fund, the money to repay those bonds will come from other tax collections or borrowing. The billions that go to Social Security each year will make it harder to find money for other government programs or will require large and growing tax increases. 

The expansion of these entitlement programs translates to higher taxes. “Unless Congress acts soon,” John writes, “younger workers can look forward to paying full Social Security taxes throughout their careers but receiving only about 75 percent or less of the benefits that have been promised to them.” 

The problem extends to Medicare as well. Like other entitlement programs, it’s also on an unsustainable path, a situation made even more dire by Obamacare. That’s why Heritage has offered a plan that would reduce the debt and fix the entitlement crisis. It’s called Saving the American Dream, and like Ryan’s budget proposal, it actually solves problems rather than punting them to a future generation.

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