Facing America’s Long-Term Budget Challenges
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Facing America’s Long-Term Budget Challenges
Brian RiedlGrover M. Hermann Fellow for Federal Budgetary AffairsThe Heritage Foundation
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Washington Now Spends $24,106 Per Household
$15,000
$17,000
$19,000
$21,000
$23,000
$25,000
1990 1992 1994 1996 1998 2000 2002 2004 2006
Fiscal Year
Infla
tion-
Adj
uste
d D
olla
rs
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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
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Social Security, Medicare, and Medicaid Costs As a Percent of GDP
4.2% 6.0% 6.4%
3.0%
6.4%8.6%
2.8%
4.0%
1.5%
0%2%4%6%8%
10%12%14%16%18%20%
2006 2030 2050
% o
f GD
P
MedicaidMedicareSocial Security
8.7%
15.2%
19.0%
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Option 1: Tax IncreasesPer Household & Translated Into Today’s GDP
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2007 2011 2015 2019 2023 2027 2031 2035 2039 2043 2047
Fiscal Year
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Option 2: Other Program CutsYearly Budget Breakdown, Assuming No Tax Hikes or Budget Deficits
Social Security, Medicare, Medicaid,
and Net Interest on Earlier Debt
0%10%20%30%40%50%60%70%80%90%
100%
2006 2010 2014 2018 2022 2026 2030 2034 2038 2042Fiscal Year
% o
f Fed
eral
Bud
get
All Other Programs
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Option 3: Continue Current Policies And Cover Shortfalls With Budget Deficits
OtherDefense
Social SecurityMedicaid
Medicare
Net Interest
0%
10%
20%
30%
40%
50%
60%
70%
80%
2000 2010 2020 2030 2040 2050Fiscal Year
Fede
ral S
pend
ing
as a
% o
f GD
P
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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
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Conclusion
More Than Just Economics
Moral Questions of Generational Burdens and Fairness
The Burden Facing Today’s Young Workers