This study develops a two-period dynamic politico-economic model in which both government debt and entitlements may default. We examine how default costs influence policy choices and social welfare. In this model, debt shifts resources from future to present, whereas entitlements target the future allocation of resources. Therefore, both instruments allow a politically powerful group in the present to extract resources from the group that will be powerful in the future, thereby mediating intergenerational conflict. Our first main result is that higher debt-default costs have a non-monotonic effect on entitlement size. […]