During the past couple of years, the financial crisis induced the US, Europe, Japan, and many other countries to greatly increase their fiscal deficits and government debt. Unlike the UK and Germany, and a few other countries, The Obama administration has done little to attack the fiscal deficit that has grown much larger since his election as president. The absence of action on the deficit front has been reported to be an important reason why Peter Orszag recently announced his resignation of Director of the Office of Management and Budget.
Yet despite the seriousness of the rapid increase in government spending and fiscal deficits during the crisis, the main budgetary issue facing all developed countries during the next couple of decades is the expected growth in spending on entitlements: mainly, spending on retirement incomes, and medical care given to the elderly. The growth in these expenditures is partly due to growing life expectancy and relatively low birth rates that will raise the number of retirees collecting social security benefits while reducing the relative number of men and women who are working to pay for these benefits. The growth in medical entitlements is mainly the result of technological advances and other changes that has led to a sharp expansion in both private and public spending on medical care during the past several decades, an expansion that is expected to continue into the future.
