Medicare from the Perspective of Generational Accounting
AbstractU.S. policy changes and more optimistic fiscal forecasts have significantly improved the long-term fiscal prospects of the country. Nevertheless, these prospects remain dismal. Unless U.S. fiscal policy changes by a lot and very soon, our descendants will face rates of lifetime net taxation that are 70 percent higher than those we now face. They will, on average, find themselves paying 1 of every 2 dollars they earn to a local, state, or federal government in net taxes. A number of factors, besides current and projected Medicare spending, are responsible for the imbalance in U.S. generational policy. But the ongoing excessive growth of Medicare benefits is certainly a key culprit. Achieving generational balance solely by cutting Medicare benefits is feasible but would require cutting over two-thirds of the program's expenditures assuming the cuts were made today. If one waits five years before cutting Medicare, four-fifths of the programs would have to be slashed. Clearly, Medicare cuts of this magnitude are unlikely to happen, but however we resolve our sever crisis in U.S. generational policy, it's clear that significant reductions in Medicare spending will be a major part of the story.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6596.
Date of creation: Jun 1998
Date of revision:
Publication status: published as Rettenmaier, Andrew J. and Tom Saving (eds.) Medicare Reform: Issues and Answers. University of Chicago Press, 1999.
Note: ME EFG
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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Find related papers by JEL classification:
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
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NBER Working Papers
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Finance and Economics Discussion Series
2000-09, Board of Governors of the Federal Reserve System (U.S.).
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