The Budget, Medicare, Medicaid, and Social Security: Time to Take Action Alison Acosta Fraser The Heritage Foundation

Federal spending will more than double, driven by Medicare, Medicaid and Social Security

Medicare, Medicaid and Social Security will grow dramatically as nation ages, but healthcare is the big driver.

Absent action under current law deficits not a problem soon – but then skyrocket to unprecedented levels

Entitlements will crowd out everything else and collide with historical long-term level of taxes

Even eliminating defense won’t solve the problem without tackling entitlements.

Bush 2008 Medicare proposal has significant savings—trimming 2014 long-term costs

2008 House Budget: No entitlement savings, but huge tax increases

But under current law taxes will rise sharply thanks to pre-Bush laws, despite Bush tax changes

Taxes will continue to rise even if ’01 and ’03 tax changes are extended

Raising revenue to balance the budget would lead to European level taxes

But European-level taxes = European-level growth

Slow European-style growth = Lower incomes in US Alabama has the lowest GSP in the U.S., but it’s standard of living is still higher than these nations.

Slow European-style growth = Unemployment

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