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:
Note: ME EFG
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Find related papers by JEL classification:
- H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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in: Generational Accounting around the World, pages 73-102
National Bureau of Economic Research, Inc.
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NBER Working Papers
3589, National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts: A Meaningful Alternative to Deficit Accounting," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 55-110 National Bureau of Economic Research, Inc.
- Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational accounts: a meaningful alternative to deficit accounting," Working Paper 9103, Federal Reserve Bank of Cleveland.
- Louise Sheiner & David M. Cutler, 2000.
"Generational Aspects of Medicare,"
American Economic Review,
American Economic Association, vol. 90(2), pages 303-307, May.
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