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The Long-Term Entitlement Spending and Deficit Problem Could Be Resolved Without Tax Increases
In May 2008, Congressman Paul Ryan (R-WI) introduced The Roadmap for America's Future, a comprehensive bill that would reform entitlements and hold taxes near their historical average of 18.4 percent of GDP. The Congressional Budget Office scored his proposal and found that it would eliminate long-term deficits without tax increases.
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Entitlement Spending Will More Than Double by 2050
Entitlements, fueled by demographic changes and rising heath care costs, will cause federal spending to explode. Medicaid spending will more than double, increasing from 1.5 percent of GDP in 2005 to 3.1 percent in 2050. Medicare spending will more than triple, increasing from 2.7 percent of GDP in 2005 to 8.9 percent in 2050.
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Entitlements Alone Will Eclipse Historical Tax Levels by 2052
Spending on the three major entitlements, Medicare, Medicaid, and Social Security, will more than double in the next 40 years. Without major reforms, entitlement spending will consume all federal tax revenues by 2052.
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If Tax Revenue Is Held At Historical Levels, Total Spending Could Reach 67 Percent of GDP
Historically, tax revenues have hovered around 18.4 percent of GDP. If taxes are kept at these levels, spending from the three major entitlements, Social Security, Medicare, and Medicaid, will push spending levels to unsustainable heights, crowding out all other programs by 2052.
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Obama's Budget Ignores Entitlement Crisis
The entitlements-Social Security, Medicare, and Medicaid-will impose costly burdens on future generations if they are not modernized. Unfortunately, President Obama's budget fails to address spending on these programs and does nothing to address America's long-term deficit problem.
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The Ratio of Workers to Social Security Beneficiaries Is Declining
As the baby boomers age, the nation's demographic makeup will change greatly. Currently, there are approximately 3.3 workers for every Social Security beneficiary, while in 1945 the ratio was approximately 42 workers per retiree. This declining ratio means that fewer and fewer workers will be left to support more and more beneficiaries.
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Repealing Tax Cuts and Not Fixing AMT Won't Balance the Budget
If the 2001 and 2003 tax cuts expire and the AMT is not fixed, taxes will soon grow to unprecedented levels. Even this massive increase in federal revenue will not solve the spending imbalance driven by Medicare, Medicaid, and Social Security.
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Social Security Spending Soon to Rise Rapidly
Although Social Security spending has remained relatively constant since the early 1980s, the approaching wave of retiring baby boomers is set to send Social Security spending to levels never before seen.
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Tax Rates Would Need to More Than Double If Entitlements Are Not Reformed
Under current law, the costs of Medicare, Medicaid, and Social Security will rise substantially. If this spending were funded solely through federal income tax increases, tax rates would more than double, even for the lowest tax bracket.
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