Summary: A statement was made on the challenge facing Federal policymakers in balancing fiscal responsibility and the needs of the people in the area of entitlement programs. These programs make up almost half of the Federal budget. Entitlement programs are either financed from Federal trust funds or paid out of the general revenues. Those paid out of the general revenues are income redistribution programs intended to address problems such as illness and poverty. The States that distribute these benefits often enter into long-term legal and financial commitments to properly administer the programs and contribute toward the program benefits. Over the past 15 to 20 years, Congress has increased entitlement spending and four major programs have been created and expanded. In addition, a rise in the longevity and population of the elderly has increased the costs of programs for the elderly. A major factor in the rising cost of entitlement programs has been the automatic increase in benefits to compensate for inflation. In addition, Medicare program costs have grown because they are tied directly to hospital costs. GAO has found that generally there is no overall systematic view of existing income security policies and the accompanying management infrastructure. The extreme procedural complexity and the number of Federal and State agencies involved has resulted in high administrative costs, fraud, waste, and payment errors. In addition, data and reporting deficiencies make it difficult to determine the system's net effects or the consequences of proposed changes to it. Curbing the growth of entitlement programs may require some combination of less generous benefit amounts, less generous indexing, stricter eligibility rules, cutting or phasing out whole programs, tighter management, and restructuring programs to shape their growth.
