25. Entitlement programs, such as Social Security, Medicare, and Medicaid, will become an increasing portion of federal government spending.

25. The future of entitlement programs, such as Social Security, Medicare, and Medicaid, will be important, controversial economic issues in our lifetimes. An entitlement program is a government program that provides benefits to a group that meets established criteria. Social Security is the federal government entitlement program designed to ensure that elderly and disabled Americans and their dependents have enough income to buy the necessities of life. Medicare is the federal government entitlement program that pays medical bills for elderly Americans. Medicaid is the federal government entitlement program that pays medical bills for low-income Americans.

The retirement of the baby boom generation may have a substantial effect on the U.S. economy. There was a significant increase in the number of births in North America from 1946 to 1964. People born in 1946 will reach age 65 in 2011. As baby-boomers retire, there will be a significant decrease in the number of people paying into the system (through payroll taxes) and a significant increase in the number of people collecting entitlement program benefits. This will require either an increase in revenues, a reduction in social benefits, or further increases in the public debt, which pass these obligations to future generations. This topic is further discussed in module 10 (Fiscal Policy).