Entitlements Are Bankrupting America

Entitlements Are Bankrupting America

Since the end of World War II, federal tax revenue has grown 15% faster than national income. Federal spending, though, has grown 50% faster.

These two statistics should scare all of us. The scariest part, though, is that the entire increase in spending can be attributed to entitlements, as the chart shows.

John F. Cogan, a senior fellow at the Hoover Institution and faculty member in Stanford University’s Public Policy Program, wrote in The Wall Street Journal that “all—yes, all—of the increase in federal spending relative to GDP (gross domestic product) over the past seven decades is attributable to entitlement spending. Since the late 1940s, entitlement claims on the nation’s output of goods and services have risen from less than 4% to 14%. Surprising as it may seem, the share of GDP that is spent on national defense and nondefense discretionary programs combined is no higher today than it was seven decades ago.”

Think that fighting in Iraq and Afghanistan broke the budget? They barely registered in comparison to the ever-rising costs of Medicare, Medicaid and Social Security.

“Since the early 1970s,” Cogan wrote, “entitlements have been the federal budget’s largest spending category, the sole source of the federal budget’s growth relative to GDP, and the primary cause of chronic budget deficits.”

He noted that:

  • Entitlement spending accounts for nearly two-thirds of federal spending.
  • Defense spending still only accounts for about a sixth of the federal budget, even with recent increases. Defense spending could be doubled and it would still be only half what the federal government spends on entitlements.
  • Social Security and Medicare expenditures this year will exceed the payroll taxes and premium payments dedicated to supporting them by $420 billion. They will account for half of this year’s federal budget deficit.

Failure to address entitlement spending will bankrupt the country, yet, as we observed last week, any attempt to rein in entitlement spending will be met by extreme resistance.

“Absent reform,” Cogan concluded, “the problem will soon become a crisis.”

We believe it already is.

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