The deteriorating financial condition of Social Security and Medicare — whose trust funds are stuffed with government IOUs, not real assets — should give people pause about growing our welfare state even further. The United States is going broke even without a European-style welfare state. Medicare attempts to control costs by reducing payments to doctors and hospitals, contributing to cost-shifting, but still is in even worse shape than Social Security. But we are still supposed to believe that larger programs loosely based on the ones running out of money will be financially viable and will even cut costs.
The entitlements crisis makes the annual federal budget deficit — revised up to $1.84 trillion, nearly four times the previous record, and above $500 billion for a decade — seem trivial by comparison. But when the federal government finds itself in a hole, no matter how deep, its solution is always to keep digging.