The Budget and Entitlements: Time to Take Action

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The Budget and Entitlements Time to Take
Action

• David John
• The Heritage Foundation

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Federal spending will more than double, driven by
Medicare, Medicaid and Social Secuirty
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The Big Three Entitlements Will Grow
Dramatically As Nation Ages
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Absent action under current law deficits not a
problem soon but then skyrocket to
unprecedented levels
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Entitlements will crowd out everything else and
collide with historical long-term level of taxes
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Even eliminating defense will not solve the
problem
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Bush 2008 Medicare proposal has significant
savingstrimming 2014 long-term costs
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2008 House Budget No Entitlement Savings, but
huge tax increases
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Projected Federal Tax Revenue for Three Tax
Policy Scenarios as a Percentage of GDP
But under current law taxes will rise sharply
thanks to pre-Bush laws, despite Bush tax changes
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Raising revenue to balance the budget would lead
to European level taxes
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But European-level taxes European-level growth
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Slow European-style growth Lower incomes in US
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Slow European-style growth Unemployment
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Conclusion Take Action on Retirement
Entitlements

• Amend the Medicare drug bill
• Raise the retirement age
• Target Medicare and Social Security to those with
  most need
• Transform entitlements into 30-year budgeted
  programs, balanced against other needs
• Measure impact of policy changes on long-term
  obligations