Wintery Knight

…integrating Christian faith and knowledge in the public square

Keith Hennessey explains the looming crisis of entitlement spending

This is the best post I have ever seen on the problem of demographics and entitlement spending, which is due to explode in about a few years. I’ll summarize so that you will click through and read this post for yourself. There is almost no text in the post, it is all graphs, and they are self explanatory. It will take your about 5 minutes to scare yourself into a coma.

Summary of the post:

  • There are 3 entitlement programs: social security, medicare and medicaid
  • These programs are funded by taxes on young people who are still working
  • These 3 programs currently cost 9% of GDP.
  • By 2050, the costs will have doubled to 18% GDP.
  • Some of this increase will be due to excess growth in health costs
  • And some of this increase will be due to demographics

Let me talk more about the demographics problem:

  • More people are living longer
  • That means that benefits are being paid out over more years, per person
  • A huge group of babies from the Baby Boom started retiring in 2008
  • But the number of younger workers who pay their benefits is not growing fast enough
  • The number of workers needed to pay each retiree’s benefits is shrinking
  • Taxes will have to increase, or benefits will have to decrease

Please read the article. It will help you to put Obama’s massive spending and tax hikes in perspective. By the way, this is a great post to forward to your friends and neighbor’s who voted for Obama who do not like to read about economics and finance.

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