Over the past 235 years, politicians have engaged in many fierce debates over entitlement spending in all its forms. Central to that debate is determining who is worthy of benefits and how much is warranted. If the bar is set too low, entitlement programs encourage unnecessary dependency that is harmful to society, as well as the individuals who become overly dependent on them. If the bar is set too high, it causes needless suffering that could otherwise be mitigated at an acceptable cost.
The challenge of determining worthiness is made considerably more difficult because public perceptions vary depending on prevailing economic conditions. During periods of plenty, thresholds tend to decline and politicians feel pressure to increase benefits and expand eligibility. The problem, however, is that when economic conditions inevitably deteriorate, the shift in perspective is asymmetrical. The electorate is far less willing to pressure politicians to reduce benefits— even if the benefits never would have been granted had the period of economic plenty never occurred.
The asymmetric variability of the public’ s perception of worthiness is especially problematic when a nation experiences an extended, but anomalous, period of economic plenty. It is this scenario that lies at the heart of the entitlement spending problem in the United States in 2025. Social Security, Medicare, Medicaid and
a variety of other assistance programs were established and / or expanded during the uniquely bountiful decades following the end of World War II. Many Americans erroneously concluded that these conditions constituted a new normal. Although the United States remains relatively wealthy today by global standards, it is not at a level that supports existing and projected levels of entitlement spending.
The inconvenient truth in 2025 is that few Americans can bear the thought of cutting entitlement benefits, in large part because a sizable percentage of citizens now depend on them. Politicians and economists who dare to propose efforts to reduce entitlement spending are vilified for their perceived cruelty. Absent from such criticism, however, is consideration of how unsustainable entitlement spending affects future generations. Demanding sacrifices from current generations is deemed immoral, but laying higher taxes on future generations and depriving them of similar benefits is considered acceptable. Even worse, few Americans consider the moral implications of failing to provide future generations with adequate borrowing capacity to fund the unpredictable, but inevitable, public dangers that Hamilton rightfully feared in 1790. It is this element of America’ s fiscal problem that qualifies it as the greatest financial challenge for current generations and an existential threat to future ones.
Mark J. Higgins, CFA, CFP ® is a financial historian, experienced institutional investment advisor and frequent contributor to Financial History magazine. His book, Investing in US Financial History( Greenleaf Book Group, 2024), recounts the full financial history of the United States from 1790 to 2023.
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