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CCH® BENEFITS — 01/15/09

Growth In Costly Federal Entitlement Programs Outpacing Tax Revenues, Treasury Department Reports

from Spencer’s Benefits Reports: Medicare hospital insurance benefits will begin to exceed program tax revenues in 2008, while Social Security benefits are anticipated to reach that point in 2017, according to the recently released Federal Government’s Financial Health: A Citizen’s Guide to the Financial Report of the 2008 United States Government, by the Financial Management Services (FMS), a bureau of the Department of the Treasury. Tax revenues in 2008 for the Social Security and Medicare programs, a total of $868 billion, represent one-third of the total U.S. government revenues this year.

The unsustainable growth in Social Security, Medicare, and Medicaid remains a long-term fiscal challenge to be addressed once the current credit crisis has passed and overall economic conditions have improved, the FMS warned.

“The projected growth in entitlement spending under current law–chiefly for Social Security, Medicare, and Medicaid–will ultimately affect every citizen in the nation,” the FMS wrote. “Continued growth in health care costs is expected to cause government spending for its major health programs to grow faster than both the economy and federal revenues over the next 75 years. Similarly, population aging is expected to cause the government’s Social Security and health program costs and expenditures to increase as a share of GDP [gross domestic product] over that period. Consequently, total government expenditures are projected to exceed total assumed revenue throughout the projection period, with the fiscal imbalance–between spending and revenue–growing larger each year into the future.”

However, the largest contributors to government’s net cost are the Department of Health and Human Services (19.6%), the Department of Defense (20.3%), the Social Security Administration (18.2%), and interest paid on debt held by the public. Federal employees’ and veterans’ benefits payable in 2008 have exploded from $90.1 billion in 2007 to $549.8 billion.

For more information, visit http://fms.treas.gov/fr/index.html.

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