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In US Economics, what is the Entitlement Crisis?

By Erin J. Hill
Updated: May 17, 2024

The United States entitlement crisis refers to the deficit between what programs such as Social Security and Medicare will require in comparison to how much funding is available. This means that the cost of these programs will be more than what is in the federal budget. Government officials have not yet discovered a long-term solution for the issue, although some have suggested raising taxes on certain goods and making some government programs harder to be accepted into.

Most agree that the entitlement crisis is a result of poor government budgeting and overzealous spending. Programs like Medicaid have been expanded, and overspending is a large issue within the government. This has resulted in a much higher national debt. These factors, combined with the housing crisis and government bailouts may result in some programs being downsized or cut altogether.

Some studies have shown that if the entitlement crisis is not remedied soon, in 15 years the only programs that will be able to be funded will be Social Security, Medicare, Medicaid, federal employee retirement, and interest on the national debt. Other programs would have to be cut or funded through deficit spending. One of the primary reasons for the entitlement crisis happening in this time frame is that roughly 78 million baby boomers will reach retirement age during this time period.

While many agree that the entitlement crisis is a huge issue facing the American economy, others believe that the issue has been blown out of proportion. Some even go so far as to say that it is a sham used to raise taxes and scare the public out of their money. Although this may be false, it is possible that the state of the US economy is not in quite as dire a condition as some analysts say. Only time will tell how hard the entitlement crisis will hit.

There is no debate, however, on the United States economy being in a tough position. In order to stop a crisis, either now or further in the future, changes need to be made to remedy government spending. Raising taxes to pre tax-cut rates would also allow more breathing room, along with downsizing many government programs.

If nothing is done and lawmakers continue to turn a blind eye, the coming economic crisis may bear many similarities to the one which started in 2007. Fortunately, the problems at hand are not insurmountable, and changes in Social Security and Medicare can be made so that both programs can be sustainable. These changes need to be implemented sooner rather than later, though, before it’s too late.

America Explained is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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