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ENTITLEMENT REFORM! SPRING 2010

D o n’t Pu t I t On Ou r Tab
The Challenge We Face
Washington holds the future of young adults in its hands.
Unsustainable budget deficits and an ever-expanding national debt
threaten to dim our once bright future. Unless the government
commits itself to making the difficult choices necessary to reduce
the size of government, cut spending, and address its untenable
entitlement crisis, our generation will suffer the burden of high
taxes without the reward of government services.

The past few years have witnesses an incredible surge in youth
TABLE OF involvement in politics. With their newfound interest, young adults
CONTENTS should not like what they are seeing. In just the past year our
generation has witnessed:
2
AN UNSUSTAINABLE • A $1.9 trillion increase in the debt ceiling – the largest one
PATH time increase in history
• The federal deficit reach a record $1.56 trillion dollars
• The total national debt approach $13 trillion
4
MEDICARE
• President Obama release a budget which doubles the debt
in 5 years and triples it in 10
• The government’s unfunded entitlement liabilities swell to
5 $76 trillion
MEDICAID
Unfortunately the nature of Washington incentivizes spending
money on the here-and-now while pushing problems onto future
6
SOCIAL SECURITY generations. Though enormous deficits make no sense for the
nation, in the current state of politics it makes complete sense.
Previous generations of young adults were simply not a large, or
8 active, enough voting bloc to counteract Baby Boomers. Millennials
OBAMACARE are different in that regard. Our size is enough to command a voice
in Washington. Now we must show them we have something to
say.
9
A MAP OUT OF THIS
MESS To that end, College Republicans are launching “Don’t Put It On
Our Tab,” an issue campaign designed to highlight the negative
impact that Washington’s spending is having on our generation. Part
10 education and part action, “Don’t Put It On Our Tab” will inform
OBAMA’S ECONOMIC young adults about our dire fiscal future and provide them an
MADNESS
outlet to have their voice heard in Washington. Help us shut off the
government spending tap. Help us tell Washington “don’t put it on
our tab.”
COLLEGE REPUBLICAN NATIONAL COMMITTEE! www.crnc.org/petition


An “Unsustainable” Path

Congressional Budget Office director Douglas Elmendorf recently wrote that,

“Under current law, the federal budget is on an unsustainable path, because federal debt
will continue to grow much faster than the economy over the long run.”

He also cites the many difficulties we face in charting a different fiscal course. The baby boomer
generation is getting older which will drastically increase the cost of health care for the aging
population. As they retire our taxpayer-to-entitlement recipient ratio will fall below sustainable levels. To
cover the difference annual deficits will spiral upwards. Interest payments on the ballooning debt will
consume more and more taxpayer dollars. Over time, the accumulated deficits will force us to
increasingly borrow from foreign nations, thus lessening domestic investment and reducing economic
growth.

It is a dire future, but it is realistic one for young adults unless something is done to solve the problem.
The problem begins and ends with the government’s spending habits. As Elmendorf explains, “almost all
of the projected growth in federal spending…stems from the three largest entitlement programs –
Medicare, Medicaid, and Social Security.”

Solving the nation’s budget crisis requires reforming these entitlement programs. Left unchecked the
cost of Medicare and Medicaid alone will double as a percentage of GDP in the next 25 years. By 2080,
when young adults enter retirement age, the government would be spending as much on these two
health care programs as it currently spends on all of its programs and services.

Social Security is also standing on shaky financial ground. For the first time in its history the program
will pay out more in benefits than it will receive in payroll taxes. This is six years sooner than even the
CBO’s most optimistic prediction. Social Security is projected to run deficits for the foreseeable future
and will have used up its $2.5 trillion surplus by 2037.



Given these humbling assessments one would expect the government to focus on reform. Instead, the
Obama administration added another entitlement to the mix in the form of government run health
care. Stripping the reform bill of its balance sheet gimmicks reveals that the bill will cost $2.3 trillion in
its first ten years. Like all government programs, that cost estimate should only be expected to go up.

Together this creates an unsustainable future for young adults. Without significant change we will be
paying a lifetimes worth of higher taxes only to see reduced benefits. As then-Senator Barack Obama
said in 2006,

“Increasing America’s debt weakens us domestically and internationally. Leadership
means that “the buck stops here.” Instead, Washington is shifting the burden of bad
choices today onto the backs of our children and grandchildren. America has a debt
problem and a failure of leadership.”

He remains right on both counts. If young adults have learned anything it is that we must not rely on an
out of touch Washington to realize how they are damaging our future. If our nation is to keep its
promise of opportunity for future generations, we must change course quickly The time must be now,
and the people must be us.



Medicare
Medicare was signed into law by President Lyndon Johnson with the promise that

“[n]o longer will young families see their own incomes, and their own hopes eaten away
simply because they are carrying out deep moral obligations to their parents.”

But as Congressman Paul Ryan recently wrote,

“Absent reform, the program will end up delivering exactly what it was created to avoid:
it will consume the prosperity of today’s younger generation to finance an unsustainable
path of spending.”

The problem is that the program, which covers more than 45 million Americans, is quickly going
bankrupt. One of the major causes of their fiscal imbalance has been Medicare’s inability to
control costs. The CBO found that total spending per Medicare enrollee grew at 10.6% annually
while the privately insured grew at 7.7%. The result of this backwards bottom line is that the
trust fund is “projected to be exhausted during 2017.” That is a mere seven years from now.

Sadly most people are resigned to the fact that Medicare will eventually fail. A recently Zogby
poll found that 47% of young adults believed Medicare would not be around by the time their
children were eligible for benefits; another 33% were unsure. This is simply unacceptable.
Moreover, it is why our generation must lead the charge to reform this broken program before
it is too late.


Medicaid

As a federal/state partnership program Medicaid is intimately woven throughout all governmental
budgets. In fact, Medicaid is the single largest expense category in state fiscal budgets. Thus, rising costs
or unsustainable growth not only threatens our federal deficit but could also force states to cut back
services or increase taxes. Unlike Medicare and Social Security, Medicaid is funded out of general
revenues on an as-needed basis. Although this pay-as-you-go system ensures financial balance any
growth in costs necessarily squeezes other parts of the budget.

The latest data from the Center for Medicare and Medicaid Services shows that the government
spends $339 billion per year – up from $14 billion in 1980. This incredible growth is projected to
continue. Prior to the enormous expansion of the program as a result of health care reform’s passage,
CMS estimated that the cost of the program would reach $674 billion in 2017. In growing twice the
rate of inflation, Medicaid’s share of the gross domestic product (GDP) was projected to reach more
than 3% by 2017.

Cash strapped states are ill equipped to handle such consistent and enormous increases in their
budgets. To control costs they must either cap enrollees or cut reimbursement rates. Opting for the
latter option has forced more than 30% of all physicians to refuse to accept any new Medicaid patients
– which often cost money to treat.

Health care reform will only make these statistics worse. Of the 32 million Americans expected to gain
coverage under the law – 20 million will be insured by Medicaid. But can the federal government, and
more importantly states, handle the addition to their bottom line? History tells us no.



Social Security

Social Security was created in 1935 to protect workers from falling into poverty in their senior years.
Currently, more than 30 million Americans depend on Social Security, with that number expected to
balloon with the retirement of the Baby Boomer generation. Without significant reform the program is
on the road to insolvency. The CBO predicts that future retirees will face benefit cuts by as much as
24% in less than 30 years.

This is not a future problem. This is a now problem. This year the Social Security system will pay out
more in benefits than it receives in payroll taxes – a full 7 years earlier than the CBO predicted. To
cover the deficit the program will begin eating into its “trust fund” which currently has a balance of
about $2.5 trillion.

Despite the cushion, Social Security’s finances are dire. The latest projects show that its funds will be
exhausted by 2040 and its projected budget shortfall over the next 65 years is $20 trillion. Since the
founding of this nation, the government, with all of its wars, entitlements, and programs has only
managed to amass a $12 trillion dollar debt. But Social Security alone will nearly double 234 years worth
of our nation’s spending.

Even the Social Security “trust fund” is an illusion. Although contributions are supposed to be set aside
from payroll tax revenues into the trust fund, the reality is much different. As Congressman Ron Paul
explained:

“Over decades Congress found itself simply unable to sit on a big pile of money, so it
began treating Social Security contributions as general revenues to fund the ever-growing
federal government. Today your Social Security account is nothing more than a ledger
filled with IOUs.”



In other words, through a slick budgetary move designed to make their bottom line look better, the
government takes the Social Security “trust fund,” spends the money to fund government programs,
while not counting the borrowed money against the deficit.Yet another example of a Washington
culture designed to reward spending money today while ignoring the strain of debt and deficits of
tomorrow.

Of course not everyone is willing to admit there is a problem. House Majority Leader Harry Reid, when
faced with the Trustees report that showed Social Security beginning to run deficits, stated

“Today’s report confirms that the so-called Social Security crisis exists in only one place
— the minds of Republicans. In reality, the program is on solid ground for decades to
come.”

Young adults know better. A recent Zogby poll, which asked if people believed that Social Security
would be around for you or your children, found that:

Without acknowledging there is a problem and working to fix it our generation runs the risk of losing its
ability to retire with a sense of financial stability. We have the most to lose. We must be the ones to act.



Obamacare

Universal health care is the nation’s newest entitlement. Given the unsustainable nature of our
existing entitlement structure, and the $76 trillion in unfunded mandates that we must find a
way to afford, is it smart to add another one? Regardless, this is the reality that we must face.

President Obama sold the nation on his new entitlement on the idea that it would actually reduce the
deficit. Unfortunately, his estimates rely on unrealistic assumptions and budgetary gimmicks designed to
hide the bill’s true cost. For instance, the program’s benefits are phased in so that the first 10 years of
revenue are used to pay for only six years of spending. In addition, Obama’s bottom line fails to take
into account the bill’s numerous “discretionary” spending programs that will costs hundreds of billions
of dollars to implement. Removing these gimmicks we find that the reform legislation will cost closer to
$2.5 trillion – an impossible burden for an already strained budget.

Of course, if we should learn anything from the explosive growth in Medicaid and Medicare costs, it is
that we dramatically underestimate the cost of health programs. For instance, in 1967 it was estimated
that Medicare would cost $12 billion by 1990. The trust cost? $98 billion – an 816% increase over the
estimate. There is little reason to expect anything different today and the results could be disastrous on
future deficits.

Future deficits are not the only way young adults are hurt by this program. The Democrats’ bill
mandates that health insurance premiums for older Americans be no more than twice the level for
younger Americans. But spending for those aged 60-64 is four to five times greater than those 18-24. In
other words, young adults are being forced to overpay for insurance.

Obamacare is bad for the bottom line. Not only does it add another trillion entitlement to a cash
strapped nation but it takes money directly out of the wallets of young adults.



A Map Out of the Mess

The debt problem is deep and multi-faceted, a combination of bloated entitlements, an aging
population, and an ever-growing bureaucracy. This is the iceberg and we’re headed right for it. But
Obama’s agenda does nothing to turn the steering wheel, instead choosing to slam on the accelerator.
Fortunately, Wisconsin Congressman Paul Ryan has come up with a plan to put the brakes on out of
control government spending. Ryan’s plan, called the Roadmap for America’s Future, is just that – a
comprehensive method for righting the balance sheet and making sure that our generation, the future,
is put on a path toward financial stability.

The all-encompassing Roadmap, tackles everything from health care reform, Medicare, Medicaid, to the
tax code. Among the highlights:

• Freeze all discretionary spending except national defense and veteran’s health care for five years
• Simplify the income tax code by creating a two-tiered flat tax – 10% for incomes up to $100,00
and 25% on higher incomes
• Lower corporate income taxes, currently the world’s second highest, by replacing them with a
consumption tax of 8.5%
• Overhaul Medicare to give seniors premium support through vouchers for private insurance to
draw more people into a competitive market
• Index the retirement age for Social Security to today’s life expectancy
• Make the tax cuts of 2001 and 2003 permanent

Republicans cannot do it without our help.Young adults are the ones who stand to lose the most if
entitlement reform is not enacted. These programs face a future of insolvency. Unless something is done
young adults will pay a lifetime worth of higher taxes for reduced benefits. Stand with us in our fight to
tell Washington “Don’t Put it On Our Tab.”



Obama’s Economic Madness

Even with the American economy showing slight signs of growth, it’s hard to escape the feeling that our
country is stuck in a state of despondency and despair. Yes, the economy is adding jobs, but the gains
are not even large enough for the roughly 150,000 new people who join the workforce each year.Yes,
the Gross Domestic Product (GDP) is growing, but it is hampered by the threat of government
regulation and taxes. There just isn’t the same sense of relief among Americans who previously greeted
modest upturns economic upturns as a positive sign that things are on the mend.

Americans have been given reason to doubt. The Obama administration’s economic policy has been one
of neglect. Democrats promised this year would be about “jobs. jobs, jobs.” Instead, the private sector
lost 7 million of them, while Washington worked towards unpopular health care and financial regulation
legislation. With Democrats so out of touch with the hopes and aspirations of the people it governs, it
is little wonder that fewer than half of young adults believe in the “American Dream.”

They are right to be concerned. If left unchecked President Obama’s spending policies will add $10
trillion to the national debt over the next decade, on top of the $13 trillion we already owe. It will cost
$5.7 trillion over the next decade just to service this mountain of debt, much less pay a single dollar
towards principal. These policies will inevitably lead to huge tax increases or runaway inflation. Either
of these consequences would drain the economy of the capital that sustains the creation and expansion
of businesses and both would remove incentives for entrepreneurialism and hard work.

Adding imprudence to irresponsibility, the President’s policies are creating bloated bureaucracies
sustained on the backs of an already struggling private sector. “Too big to fail” companies are seeing
that arbitrary status cemented by law. Companies that made the right decisions when times were good
are being forced to effectively subsidize competitors that didn’t. Fannie Mae and Freddie Mac, who
were largely responsible for the financial collapse, continue be ignored by Washington despite the $145
billion in taxpayer money that the government-backed mortgage giants have received . Given the
backward economic thinking it should not come as a surprise that the number of people who have
been out of a job for at least 6 months continues to rise – having topped 6.5 million in April. Sadly,
structural unemployment threatens to become a long-term reality for the first time in American
history. While the Administration seems resigned to this new economic norm, the 26% of America’s
young people who are unemployed must take an active stand.

President Obama’s harmful actions on the economy has led us down an economically perilous road; but
his inaction on America’s looming entitlements crises is just as risky. The simple fact is that America’s
entitlement programs, as they currently stand, are sinking ships that threaten to drag the whole
American economy down with them. Social Security, Medicare, Medicaid and other programs will bring
in tens of trillions less in revenue than they owe in promised benefits over the coming decades. The
total unfunded liability of the three main entitlement programs has reached an unsustainable $76
trillion. In the face of this impossible sum President Obama created another one – universal health care
– which will only add to the ever-growing burden on future generations. Rather than solve the
problems we have, the President, and the congressional leadership, have shown a commitment to
making them worse.

Admittedly, President Obama did not cause the downturn that has racked the American economy for
the last two years. However, the mentality that drives his economic policy—an irresponsible approach
that sanctions spending well beyond your means and ignoring the consequences--did.



!t shouldn’t surprise anyone that creating government jobs of dubious public benefit paid for by
unsustainable public debt has failed to jumpstart the economy or boost economic optimism. Far from
starting a new era of growth, the President has laid the groundwork for an era of tortuous decline.

In just a year and a half, President Obama’s economic policy has resulted in massive, unsustainable debt,
a broken economy without the means to self-repair, and the same underlying problems that caused the
financial crises in the first place. America cannot go on like this. It’s time to tell America’s leaders to
stop putting trillions of dollars in new spending on the tab of future generations. And if they don’t
respond, we need to elect leaders that believe in responsible, sustainable fiscal policy. It’s time to throw
out the mad economic policies that got us into this crisis and sustained it.

America can keep its promise of opportunity and reward for hard work to future generations, but only
if young people make their voices heard and work for change. The time must be now and the people
must be us.


600 Pennsylvania Ave SE
Ste. 215
Washington, DC 20003
Oﬃce: 202.608.1411
Fax: 202.608.1429
Email: team@crnc.org


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