The United States is heading down the path to becoming an insurance company with a really big army.

Let’s start with Medicaid.  The most recent report shows that federal and state spending on health care for lower income Americans rose nearly sixteen percent from 2014 to 2016, to $576 billion. Much of the rapid rise is attributable to the Medicaid expansion under Obamacare.

If nothing changes—and we don’t know yet what, if anything, Congress will do—Medicaid spending will approach $1 trillion by 2025.  Congressional Republicans are trying to curb the rise in Medicaid spending, but that’s politically difficult.

Nearly lost in the healthcare debate is a new release on the status of Social Security and Medicare programs. The annual report quantifies the worsening threat to the long-term fiscal soundness of both programs.

“Both Social Security and Medicare will experience cost growth substantially in excess of GDP growth through the mid-2030s due to rapid population aging caused by the large baby-boom generation entering retirement and lower birth rate generations entering employment,” the report said.

That’s the essential problem for all three of the programs; they are growing faster than the economy. If no changes are made, they will swamp the country in debt and generate an even larger drag on the economy.

The report says the combined retirement and disability programs under Social Security are okay for now, but by 2034 the trust funds will be depleted. At that point, benefits will need to be reduced or taxes will have to be raised.

(One additional note: Trust fund is a misnomer. The federal government has already spent that money and replaced it with special treasury bonds that amount to I.O.U.s from Uncle Sam.)

Investor’s Business Daily reports, “Waiting only makes the problem worse.  Putting off fixes would require a payroll tax hike of nearly 4 percentage points or across-the-board benefit cuts of 23 percent.”

Medicare is also in trouble.  The report says the hospital insurance trust fund portion of the program will be depleted in 2029. “At that time, dedicated revenues will be sufficient to pay 88 percent of HI costs.”

Our policy makers have willingly indebted future generations, and Americans have been complicit because we recoil against more taxes, benefit cuts and increases in retirement age—anything we fear will impact our quality of life.

Future generations will not look back fondly on us. They will wonder why, for all the talk from us about wanting a better life for our children and grandchildren, we spent their retirement and burdened them with debt that made it harder for them to achieve their dreams.

 

 

 

 

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