Policy Discussion Papers
Providing you with in-depth analysis of monetary and financial policy.
- No. 5
- This paper describes the deficiencies of the measures used to calculate the federal budget, make revenue and spending projections, and assess the sustainability of current fiscal policies. The nature of the deficiencies hides the tremendous impact that Social Security and Medicare commitments will have on the budget in the future, given the way the programs are structured currently and the momentous demographic shift underway as the baby boom generation approaches retirement age. This paper proposes two new simple measures that will enable government officials and the public to calculate more accurately the costs of maintaining these programs into the relevant future. The measures provide a better understanding of the costs involved, when they will be incurred, and by whom. The measures also provide a way to meaningfully compare the various solutions that have been proposed for dealing with the impending fiscal crisis that will be caused by Social Security and Medicare. This article was also published as a monograph by the AEI Press, the publisher for the American Enterprise Institute. (PDF)