Final answer:
The statement in question is false; Social Security and Medicare are funded by payroll taxes, not income taxes, and they operate on a pay-as-you-go system, which may require reforms for long-term sustainability.
Step-by-step explanation:
The statement that contributory programs are paid by all workers' income taxes and consist of entitlement programs like Social Security and Medicare is false. Contributory programs like Social Security and Medicare are funded through payroll taxes, not income taxes. Workers pay a percentage of their earnings into these programs, which in turn provide income and health care benefits to the elderly. However, these programs are not literally 'insurance' since those currently contributing are not directly eligible for benefits. Despite this, they function similarly to insurance, with the understanding that the regular payments secure benefits upon reaching old age or becoming sick when old. The term 'social insurance' aptly describes these programs.Contrary to setting aside Social Security and Medicare, other entitlement programs in the U.S. government make up a smaller portion of the budget. Programs like TANF, SNAP, unemployment insurance, and housing assistance collectively add a significant amount but still represent less than half of total federal government spending.Currently, Social Security and Medicare operate on a pay-as-you-go system, relying on the payments of current workers to fund current retirees' benefits. As the demographic structure shifts with an aging population, this poses sustainability challenges, prompting discussions on various reform proposals which include removing the cap on wages subject to payroll taxes or shifting towards saving accounts funded over a worker's lifetime.