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Manhattan Institute

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Issues 2016: Entitlement Programs Are Unearned Welfare Transfers From Younger, Poorer Americans to Older, Wealthier Ones

issue brief

Issues 2016: Entitlement Programs Are Unearned Welfare Transfers From Younger, Poorer Americans to Older, Wealthier Ones

November 17, 2015
EconomicsTaxBudget
OtherChildren & Family

Abstract

Social Security and Medicare—America’s government-pensions and medical-insurance programs for the elderly—require dramatic reform if they are to survive. The programs have exploded beyond their initial scale, with seniors now receiving many times more than what they contributed in taxes.

Key Findings

  • In 2014, Social Security and Medicare spending accounted for 8.5 percent of U.S. GDP. In 2035, absent reform, the two programs will account for 11.4 percent of GDP.
  • U.S. seniors who turned 65 during 2000–2010 will receive $2.87–$7.00 of Medicare benefits for every dollar they paid in Medicare taxes—even after accounting for the potential investment growth of such taxes.
  • Absent reform, future government spending on health and pensions for the elderly will exceed future tax receipts by about $210 trillion.

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