Sooner or Later: Facing the 800-pound Gorilla
From Econbrowser:
Sooner or later we have to do something about Medicare. Why not sooner?
Over the last 20 years, federal spending on Medicare and Medicaid grew 3.1% faster per year than did U.S. GDP, with these programs rising from 9% of federal outlays in 1985 to 20% today. With the aging U.S. population and new prescription drug benefit, one might expect Medicare spending to rise even faster over the next few decades.
It's amusing to extrapolate the 3.1% trend growth into the future. Federal spending on all programs combined has historically been a fairly stable fraction of U.S. GDP, averaging 20% of GDP for the last half century. The graph below illustrates the consequences if federal spending on all programs other than Medicare and Medicaid were to hold steady at 16% of GDP while Medicare and Medicaid continue to grow 3.1% faster than GDP. Under that scenario, the next few years would see the United States start to break away from that 50-year tradition of 20% federal spending, with the share of federal spending in total GDP rising to 32% by 2050.
But hey, let's not stop there. If Medicare and Medicaid spending continue to grow 3.1% faster than GDP, by 2150 the federal government would consume 370% of GDP. Now there's a budget problem needing someone cleverer than me to suggest a solution!
And the liberals have no solution but offer up their mantra: just say no.
The conservatives have made proposals for some time about how to fix the train that's coming at us head-on. The Dems have refused every overture, but have no ideas of their own on how to fix it.
But there are not many solutions available. You cannot have decreasing birth rates, increasing life expectancies, increasing social welfare promises, lowering retirement age, etc, and not see a train wreck waiting to happen.