Yesterday’s USA Today brought the not so surprising news that federal tax revenue has fallen drastically due to the struggling economy. The 34% decrease represents the largest plunge since the last major recession in 1981. Although revenue is down, the main driver of deficits is spending. Over the long term these deficits will become increasingly difficult to control because of escalating entitlement spending on Social Security and Medicare. As the article notes,
The other deficit driver is government spending, which, the [American Institute for Economic Research] report says, is the main culprit for the federal budget deficit…
The government may have a hard time trimming spending to reduce the deficit when the recession ends. The 77 million Baby Boomers— those born in 1946 through 1964 — will start tapping their federal retirement benefits soon, which means increased government outlays for Social Security and Medicare.”
As progressively more Baby Boomers qualify for entitlement benefits, significant debt and deficit reduction will become increasingly challenging because these programs will consume all federal revenue by 2052. As Heritage Foundation analysis points out, we can’t reduce spending and control deficits without reforming entitlements. For instance President Obama’s budget, which doesn’t address entitlements, will send publicly held debt to 82.4 percent of GDP by 2019 according to projections by the non-partisan Congressional Budget Office.
The facts are in and they paint a grim picture. The dates that both the Medicare and Social Security trust funds will run dry has moved forward. The Social Security surplus has fallen from $87 billion in 2008 to $19 billion in 2009; meanwhile federal debt is set to reach levels not seen since the end of World War II. The data has never been clearer. The time for serious entitlement reform is now.