FUNDING IS LIMITED FOR THE YOUNGEST AMERICANS

Increasingly, economists and lawmakers are taking a close look at the cost of financing Medicare, Social Security, and other entitlement programs that benefit older Americans. This is, of course, a good thing. Spending on these entitlements is rising significantly and will increase dramatically as the nation's 77 million baby boomers reach retirement age. As a nation, we need to take a critical look at these programs, know what’s coming, and know how to prepare.

While we do this, it’s important that those of us who care for and about older adults also acknowledge the value of programs that benefit Americans of other ages. And it’s important that we urge policy-makers to investigate all of our options for meeting the needs of Americans of all ages. A recent Urban Institute report, “Kids’ Share 2007: How Children Fare in the Federal Budget,” makes this quite clear.

According to the March report, increased spending on entitlements such as Social Security, Medicaid, and Medicare, which primarily benefit older people, could seriously limit spending on children’s programs—unless current federal spending and revenue policies change.

As a share of gross domestic product (GDP), federal spending on entitlements that primarily benefit older adults has nearly quadrupled since 1960, while spending on children has risen far more slowly, the report finds. In 2004, federal spending per child was $3997. Per capita spending on older adults in the Social Security, Medicare, and Medicaid programs was $19,405 that year. Without changes in policy, federal spending on kids--including Medicaid benefits for children--will decline from 20% to 13% of total domestic spending over the next decade, the report projects. At the same time, spending on the “non-child” portions of Medicaid and Social Security and Medicare will rise from about 46% to 59% by 2017.

The diverging trends in spending for programs benefiting older adults and those benefiting children are largely due to the nature of the programs, the authors explain. Most children’s programs are discretionary and need annual appropriations to continue to get funding.

“Depending on the budget climate and other spending priorities, these discretionary programs may or may not even see increases that keep their total spending current with rising prices,” the authors write. “By contrast, the three major entitlement programs— the non-child portions of Social Security, Medicare and Medicaid—grow automatically with average wages or medical programs.”

Growth in the number of Social Security and Medicare beneficiaries and in spending on these entitlements could do more than significantly limit funding for the youngest Americans, the report notes. Unless there are major changes in spending and revenue policies, it could also create a widespread funding crisis. Without a policy overhaul “there will be no federal dollars left for any program outside of the three major entitlements, plus defense and international affairs,” by 2030, the authors warn. “This figure reflects an impossible scenario of trying to keep most current promises on the spending side with the automatic program growth while retaining all tax cuts on the revenue side.”

Clearly, we need not only to scrutinize existing programs, including Medicare and Social Security, but also to insist that legislators take a hard look at all options for spending and revenue policies. We can’t afford to do less.