June 30, 2003

Drugs for the Elderly, Taxes for the Children

Cato's director of fiscal policy Chris Edwards explains how the expansion of Medicare and other elderly entitlements will force young Americans to pay much higher taxes:

In just five years, a demographic tidal wave will begin that will forever alter the federal government. The large baby boom generation will start retiring and cause the costs of Social Security and Medicare to explode. Unfortunately, Congress seems blissfully unaware of the coming crisis as it works to create another elderly entitlement in the form of a $400 billion Medicare prescription drug benefit.

Ironically, many in Congress support an expansion of elderly entitlements, but also claim to be champions of childrens' interests as well. But children, as tomorrow's taxpayers, will be the losers as the costs of unreformed elderly programs balloon. Even before a new drug benefit is added, Social Security, Medicare, and Medicaid spending will almost double as a share of gross domestic product by 2040. Federal spending will be pushed up from 19.9 percent of GDP to at least 27.1 percent. That 36 percent expansion in government's share of Americans' income will come at the expense of today's children when they become middle-aged taxpayers.