Federal Entitlement Spending

Abstract

Federal spending has hovered at around 20% of GDP for the past 50 years. Recent CBO reports forecast deficits averaging around 5% of GDP each year for the next 10 years, combined with rising federal spending continue to raise the federal debt to unprecedented peacetime levels. Today, Social Security, Medicare and Medicaid are the three main transfer programs – accounting for almost 50% of all federal government outlays. In PERC Policy Study 1801, authors Liqun Liu, Andrew J. Rettenmaier and Thomas R. Saving compare federal spending over time, discuss the causes behind the rise in spending, and focus on transfer program reforms. The paper provides workable alternatives that constrain spending by adjusting the full retirement age and benefit formula of Social Security and Medicare, and also redefining the basis by which each state receives federal Medicaid contributions.