  The worries expressed by Alan Greenspan that the long run economic growth of
the United States will fade away due to increasing burden of entitlements
motivated us to empirically investigate the impact of entitlements of key
macroeconomic variables. To examine this contemporary issue, we estimate a
vector error-correction model is used to analyze the impact of entitlements on
the price level, real output, and the long-term interest rate. The results show
that a shock to entitlements leads to decrease in output and lends support to
the assertion made by Alan Greenspan. Several robustness checks are conducted
and the results of the model qualitatively remains unchanged.
