This thread is moving fast so I won't try to respond to everything people have said. Just a couple of thoughts and clarifications based on what I see from scanning so far...
Entitlements - a lot of people seem very hyped over this word. It doesn't refer to simply what the dictionary tells you the word means. "Entitlement" sectors of the federal budget are distinct from "discretionary" sectors. Basically, most government departments - state, defense, interior, etc. - submit their budgets for approval every year and the congress and can raise or lower those budgets at its discretion. If congress decided to slash the military budget by 50% next year, it could theoretically do that. Entitlements, however, are not that flexible - they are permanent government commitments to pay benefits or make debt payments, and congress can't just refuse to fund them or alter their funding unless it's going to overhaul the laws that govern social security (et al) itself. It's the budget line that's "entitled," not so much the attitude of the beneficiaries.
There's also been some misunderstanding about how something like Social Security gets funded. It's not a savings account where you pay into it, build some interest on your principal, and then after retirement withdraw the same money you put in. It's not an investment. Rather, it's a revolving door - the money that current beneficiaries can draw is money that CURRENT workers are paying in, not money the retirees paid into it in the past. It just "feels" like a kind of savings account because how much you get to withdraw is scaled to how much you contributed over your career. That's why there's a looming social security crisis - with the baby boomers entering retirement, and a lower birth rate producing fewer workers to pay into the system, more money is getting withdrawn than is being paid in. European countries (with even lower birth rates than the US, and populations that are actually declining) have been facing this kind of problem for some time already.
Finally, something I think is always worth remembering in economic discussions, as far as the US is concerned (and this seems like it's largely been an American debate). We often take the prosperity of the post-war years as the benchmark and measure subsequent decline by that standard. A number of people here have posted about the economic fortunes/expectations of their parents or grandparents. It's easy to forget, though, that the post-WWII era was a period of extraordinary and unusual prosperity in the US, produced by circumstances that probably will not be repeated. Most of the other industrialized countries of the world - Germany, Russia, France, England, Japan - had been a massive war zone for years on end. Their cities had been bombed to rubble and their populations decimated by the war. Germany, with a population around 70 million, lost 7 to 9 million people - at least 10% of their total population. Russia lost up towards 14%, Japan around 4%, France and England around 1-1.5%. Compared to that, the US, with a 1939 population of 131 million, lost about 400,000 - about 1/3 of 1%. Our cities weren't bombed, apart from Pearl Harbor, nor occupied by enemy soldiers.
What that meant was that after the war, the US found itself as the only major industrial capitalist country with its workforce and industry completely intact. Everybody else had to rebuild and repopulate for years while we made everything and sold to everybody. That meant that American companies were raking money in hand over fist, there were lots of good jobs at all skill levels, and cash-rich companies competing to get the best workers drove salaries through the roof.
By the late 1960s, though, this VERY unusual recipe for unprecedented prosperity was running out of steam. A new generation of workers had grown up in European countries and Japan, the factories and cities had completed the rebuilding process. Meanwhile, the Cold War had meant the US government kept up wartime-style military spending with its accompanying deficit budgets for decades, keeping up with the payments thanks to the country's prosperity. It couldn't last forever. American companies started having to compete with European and Japanese ones and weren't used to it, American workers were more expensive than Mexicans or Koreans, the Arab world organized OPEC and gas was no longer so cheap... and so on. You know the story.
The point of all this is that the reason we had less income inequality back in, say the 50s, was owing to very unusual circumstances that can't be repeated, unless we have a new war and bomb the rest of the world back to the stone age again - not a promising economic plan. It was not a situation that just arose naturally and something's "gone wrong" to end it.
My dentist has 2 sons that are dentists. She would have been happy to give her clinic to her sons, although they are periodontal surgeons.
