Long-term solutions to the federal budget crisis will only be found in politically unpopular reforms of Medicaid, Medicare and Social Security, Keith Hennessey, research fellow at the Hoover Institution at Stanford University, said in a lecture in the Rockefeller Center on Thursday.
The massive growth in government spending stems from the three programs that comprise 47 percent of spending Medicare, Medicaid and Social Security according to Hennessey.
"The big three entitlements are growing so fast that they are completely overwhelming everything else government does," he said.
Drastic reforms to entitlement programs are inevitable if the country is to stay fiscally functional, Hennessey said.
"The numbers are going to force us," he said. "It has nothing to do with ideology or philosophy or whatever you think. It's the arithmetic of the programs."
There are no easy or politically palatable solutions to the rapid growth of entitlement programs, Hennessey said.
In order to slow social security's long-term growth, legislators will have to make changes in the current Social Security structure, including the age at which seniors get benefits and the amount of cash benefits per person, Hennessey said.
For Medicare and Medicaid, additional solutions include regulating the quality and type of service provided, or cutting the cost per service paid by the government, Hennessey said.
Changing population demographics fuel the necessity to cut entitlements, according to Hennessey. Due to longer life spans and lower birth rates, the number of taxpayers per Social Security beneficiaries has dropped from 16 to three in the last 50 years. The post-World War II baby boom also created a population surge in retirees that will occur over the next 15 to 20 years, Hennessey said.
Hennessey who displayed a graph that showed the disparity between federal revenues, which has stayed relatively constant over the past 10 years, and federal spending, which has spiked dramatically in the past decade said the size of the federal deficit cannot be attributed to a particular political party.
"If you just look at the graph and say, Which party is better on budget deficits?' that's not obvious to me," Hennessey said.
Both major political parties are hesitant to anger powerful organizations such as the AARP, and neither wish to appear to betray their elderly constituents, according to Hennessey.
"Past politicians have made promises that cannot be sustained," he said.
Hennessey called for new promises based on the calibration of resources to state and local governments and the private sector. Medicare, Medicaid and Social Security need to become protection against poverty rather than automatic entitlements, Hennessey said.
These changes must take place as quickly as possible, so that they affect young and healthy people who have time to plan ahead, according to Hennessey.
If the government takes no action until the brink of crisis, raising taxes will be the only solution a short-term fix that will only perpetuate the cycle of federal growth and deficit, Hennessey said.
This fiscal pattern cannot continue along its trajectory without eventually leading to economic ruin, Hennessey said.
"It's a problem that does not look like it's going to solve itself any time soon," he said.
Raising taxes and cutting spending are fundamentally different ways of rectifying the imbalance, according to Hennessey. The first method places the burden of paying taxes on current citizens, while the second method reallocates resources from the federal government to the rest of the country, Hennessey said.
"Washington budget debates treat these two [methods] as the same, and they're not," he said.
Decisive and politically risky action are not present in Washington's current political climate, Hennessey said, adding that he finds reason for hope in the constituents who hold politicians accountable for their actions.
"I think the American people are ahead of their politicians and will demand solutions that have hitherto been politically untouchable," he said.
The younger population has proved the most receptive to these ideas, Hennessey said. Hennessey attributed this trend to younger people's willingness to question the status quo and their lack of commitment to a world view in which Social Security is sacrosanct, he said.
Hennessey's lecture represented the Rockefeller Center's commitment to exposing Dartmouth students to a diverse range of thinkers on current public policy issues, according to Andrew Samwick, economics professor and director of the Rockefeller Center.
The lecture, titled "The Size and Scope of Government in Aging America," was part of the Brooks Family Lecture Series.
