can we afford social security and medicare for 76 million boomers? (david c. john)
TRANSCRIPT
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8/7/2019 Can we afford Social Security and Medicare for 76 million boomers? (David C. John)
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The Budget and Entitlements:
Time to Take Action
David JohnThe Heritage Foundation
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8/7/2019 Can we afford Social Security and Medicare for 76 million boomers? (David C. John)
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Federal spending will more than double, driven
by Medicare, Medicaid and Social Secuirty
Medicare
Medicaid
Social Security
Other
Net Interest
45-Year Historical
Level of Tax Revenue
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1975 1985 1995 2005 2015 2025 2035 2045
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Total Federal Spending and Tax Revenue as a Percentage of GDP
Defense
Source: Calculations based on Congressional Budget Office (CBO) and Medicare and Social Security TrusteesData (discretionary spending held constant).
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The Big Three Entitlements Will Grow
Dramatically As Nation Ages
Med i
re
2.
Med i
re
3.
Med i
re
4.
Med i
re
6.
Med i
re
8.
Med i
re
9.
Med i
id
1.
Med i
id2.3%
Med i
id
2.8%
Med i
id
3.4%
Med i
id
4. %
Soc i
l Securit
4.4%
Soci
l Securit
4.
%
Soc i
l Securit
.
%
Soc i
l Securit
6.6%
Soc i
l Securit
6.9%
Soc i
l Securit
6.9%
Med icaid
1.
%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
2005 2010 2020 2030 2040 2050
Spendingon ree Entitlement asa ercentageof
Source: Spendingand evenuesfrom ong-Term udget utlook, ecember 2005 (Scenario2 ata), 2006Social Securit
and Med icareTrustees
eport.
Total = 9.
%
Total = 18.2%
Total = 15.9%
Total =12.5%
Total = 19.9%
Total = 8.6%
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Absent action under current law deficits not a problem
soon but then skyrocket to unprecedented levels
Federal eficit s ercentage f
Federal eficit
45-
ea r
Historical A
erage
-5%
0%
5%
10 %
15 %
20 %
25 %
30 %
35 %
1962 1972 1982 1992 2002 2012 2022 2032 2042
Source: lculationsbased n ngressional ! ge t " ffice ( " ) nd # edicare nd $ % ial $ ecurityTrustees ta (! iscretionaryspending & eld % nstant).
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Entitlements will crowd out everything else and
collide with historical long-term level of taxes
Medicare
Medicaid
Social Security
Historical Level of
Tax Revenues
0%
5%
10%
15%
20%
25%
1965 1975 1985 1995 2005 2015 2025 2035 2045
0%
5%
10%
15%
20%
25%
Source: Spending and Revenues from CBO Long-Term Budget Outlook, December 2005 (Scenario 2 Data),2006 Social Security and Medicare Trustees Report.
Three Major ntitlements and Tax Revenues as a Percentage of GDP
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Med icare
Med icaid
Soc ial Securit
'
( t ) er
0et I
1terest
45-2
ear Hi3torical
4 eve l of5
ax 6 evenue
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Total Federal Spendi gand ax evenueasa ercentageof
7efense
Source: 8 alculationsbasedon 8 ongressional 9 udget ( ffice (8 9 ( ) and Med icareand Soc ial Securit'
5
rustees 7 ata (di 3 cretionar
'
3 pendi 1 g ) eldconstant).
Even eliminating defense will not solve the
problem
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Bush 2008 Medicare proposal has significant
savingstrimming 2014 long-term costsTotal ederal Spending and Tax Revenues as a Percentage of GDP
MedicareMedicaid
Social Security
Defense
Other
Interest Tax Revenue
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Medicare
Medicaid
Social Security
Other
Net Interest
45 -@
ear Historical
Level of Tax Revenue
0%
5%
10 %
15 %
20 %
25 %
30 %
35 %
40 %
45 %
50 %
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
0%
5%
10 %
15 %
20 %
25 %
30 %
35 %
40 %
45 %
50 %
Total ederal Spending and Tax Revenue as a Percentage of GDP
Defense
Source: Calculationsbased on Congressional Budget O ffice (CBO) and Med icare and Social Security TrusteesData (discretionary spending held constant).
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2008 House Budget: No Entitlement Savings,
but huge tax increases
Total d al p nding andTa nu s as a c ntag ofG
dicadicaid
ocial cu ity
fense
Other
Interest
Ta evenue
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
M edicare
M edicaid
A
ocia lA
ecurity
O ther
Ne tInterest
45 -B
earHisto rical
Lev elo fTaC
D e ve nu e
0%
5%
10 %
15 %
20 %
25 %
30 %
35 %
40 %
45 %
50 %
1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
0%
5%
10 %
15 %
20 %
25 %
30 %
35 %
40 %
45 %
50 %
To tal ederal pending andTa ev enue as a ercentageo f G
E ef ense
S ourc e: Calculations basedon Cong re ss ional BudgetO ffice (CBO) an dM edicare an d So cia lS ecurity T ruste es E ata (discretiona ry sp ending held co nstant).
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Projected Federal Tax Revenue
for Three Tax Policy Scenarios asa Percentage of GDP
But under current law taxes will rise sharply thanksto pre-Bush laws, despite Bush tax changes
Current Law: F ushG
ax
CutH
Expire
With F ushG
axCutH
Extended
With F ush G
axCutH
Extendedand AMT I ix
16%
18%
20%
22%
24%
2005 2015 2025 2035 2045
Pr jected ederal ax evenuefor hree axPoli y enari as
aPer entage f P (2005-2050)
P Qur
Re:CBOL Q S g-TermBudget Outlook, T ecember 2005and Budget and ER Q S Q mi R Outlook, January2007.
Average G
axBurden,1966-2006 = 18.2%
HighestG
axBurden i U U.V
. HiH
t W ry = 20.5%
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8/7/2019 Can we afford Social Security and Medicare for 76 million boomers? (David C. John)
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Med icare
Med icaid
Soc ial SecuritX
Yther
Net I terest
45-a
ear Hi b torical
Leve l ofc
ax d evenue
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Total Federal Spendi gand ax evenueasaPercentageof P
eefense
Source: CalculationsbasedonCongressional BudgetY
ffice (CBY
) and Med icareand Soc ial Securit
X
c
rustees
eata (di
bcretionar
X
b
pendi
gheldconstant).
Raising revenue to balance the budget would lead toEuropean level taxes
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But European-level taxes = European-level growth
3.3%
2.7%
2.1%
1.3%1.4%
2.2%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
U.S. Sweden France Italf
ger
hany EU-15
Real P r wt Over Ten- ears (1995-2005)
Source: OECi inFigures,2006-2007Edition.
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Slow European-style growth = Lower incomes in US
$41,900
$32,700
$30,200
$28,500
$29,800 $29,900
$33,264
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
U.S. Sweden France Italp
qer
rany EU-15 Alabama
Source: Cs t u
trp
q v
Pdatafrs r
OECv inFigures,2006-2007Edition;State q SPdatafr s r BEA.
Pper Capitafor 2005 (UsingC rrent PPPs)
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Slow European-style growth = Unemployment
5.1%
7.8%
10.0%
7.8%
11.2%
8.3%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
U.S. Sweden France Italw
xer
yany EU-15
Source: OEC inFigures,2006-2007Edition.
U empl ent Ratefor 2005
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Conclusion: Take Action on
Retirement Entitlements
Amend the Medicare drug bill
Raise the retirement age
Target Medicare and Social Security to thosewith most need
Transform entitlements into 30-year
budgeted programs, balanced against otherneeds
Measure impact of policy changes on long-term obligations