Economics, Pethokoukis, Taxes and Spending

The US government: A weaponized entitlement machine

Image Credit: Wall Street Journal

Image Credit: Wall Street Journal

The WSJ’s Jerry Seib offers a helpful reminder of what’s really happening with federal government spending. While some folks like to focus on wasteful spending on, say, clean energy boondoggles like Solyndra or some unneeded Pentagon weapons system, that stuff isn’t the really big problem:

This reality has been masked by the fact that government spending isn’t declining, although the rate of increase has moderated. But the part of government that is really increasing right now is the part that churns out checks for people receiving Medicare, Medicaid and Social Security.

Meantime the ranks of government workers at the federal, state and local levels—the bureaucrats everybody loves to hate, as well as more beloved figures such as firefighters—are declining, as is the share of government spending that goes to the programs they run.

What’s happening, in short, is that government, particularly at the federal level, is turning increasingly into an entitlement machine, dispensing benefits to those who qualify, while a combination of recession, deficits and an aversion to new taxes is squeezing most remaining government activity.

Make that a nuclear-armed entitlement machine. (Well, at least until Chuck Hagel gets to the Pentagon.) Seib goes on to point out how spending has been turned upside down. Nondefense discretionary spending has declined from almost 25% of the federal budget in 1978 to about 15% of the budget this year — or 3.5% of output from 5.1%. Mandatory spending, on the other hand, has expanded from 45% of federal spending — and just over 9% of GDP — in 1978 to 60% of the federal budget, or 14% of the country’s total output today.

A good question: Is Washington cutting the wrong kind of spending?

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13 thoughts on “The US government: A weaponized entitlement machine

  1. re: ” But the part of government that is really increasing right now is the part that churns out checks for people receiving Medicare, Medicaid and Social Security.”

    more AEI Blather here. SS is paid for with FICA taxes not general revenues. Medicare Part A is also paid for with FICA taxes not general revenues. Medicare Part B, C, D IS paid for with general revenues but it’s on the order of about 270 billion out of over 3 trillion in spending.

    The solution to Medicare is to kill the subsidized Part C “gap” coverage and take us back to the original 20% co-pay which will put more senior skin in the game.

    The second thing is to increase the current premiums for 100 a month to 400 a month for people who have more than 70K a year in retirement income.

    These are things that can be done to reduce or even eliminate the Medicare cost to general revenues but that still leaves us with about 1.5 Trillion in National Defense spending when our actual revenues are about 1.5 trillion.

    the refusal of the “it’s the entitlements that are at fault” folks to recognize the realities of our actual tax revenues available plus the fact that we spend far more for “defense” than just the base DOD budget is the real reason we cannot get to a balanced budget.

    we cannot get there by cutting entitlements only and that’s the reality they won’t face.

    • Larry,

      “SS is paid for with FICA taxes not general revenues. Medicare Part A is also paid for with FICA taxes not general revenues.”

      Are you saying that every year FICA tax revenue covers 100% of the payments for SS and Medicare part A?

      • re: ” “SS is paid for with FICA taxes not general revenues. Medicare Part A is also paid for with FICA taxes not general revenues.”

        Are you saying that every year FICA tax revenue covers 100% of the payments for SS and Medicare part A?”

        pretty much until they did the temporary 2% payroll deduction.

        FICA/SS will have to be reformed soon but we still have a 10-20 year window to do it.

        But the bigger issue here is that even if/when SS starts eating into the empty Trust Fund, remember that FICA is was created that fund originally, not general revenues.

        It was lent to general revenues and it is a legitimate debt back to FICA.

        but beyond all of this – SS is NOT CURRENTLY a big entitlement hit on the general revenues – it’s a gnat on a dogs butt even if you want to count pay back from the trust fund and it is nowhere near the real problem of the B,C and D Medicare which DOES have a problem.

        So WHY IS SS INCLUDED as if it is the problem?

        it makes no sense,

        It’s as bad or worse than pretending that national defense is not a big hit on general revenues.

        between those two narratives, about SS and DOD, they basically pollute and make murky the real issues.

        the REAL issues are the B,C,D Medicare AND DOD/National Defense spending NOT FICA/SS.

        it’s dishonest and it ignores the real issue.

        • SS is financed from FICA not General Revenues and the law for SS says that you cannot pay out more in SS benefits that FICA generates in revenues so if nothing is done – the SS payout will automatically reduce.

          yet the folks who say they are concerned about the deficit and debt continue to say that SS must be “cut” – like that would have some effect when in fact, it would have zero effect.

          We need to concentrate on the REAL contributors to the deficit and debt and to focus on them instead of things that simply are not part of the issue.

          the only people who want to include FICA/SS in the discussion are the people who are opposed to the CONCEPT of SS – from the get go – and in fact, oppose all entitlements no matter how they’re funded even if they are funded from dedicated payroll taxes.

          80% of voters disagree with that approach. The 20% who agree are far right fringe folks.

          • the only people who want to include FICA/SS in the discussion are the people who are opposed to the CONCEPT of SS – from the get go – and in fact, oppose all entitlements no matter how they’re funded even if they are funded from dedicated payroll taxes“…

            Hey spam boy, have you ever heard of the word, “theft“?

            There’s nothing voluntary about any of the worthless, socialist crap but it carries on anyway with endless track record of corruption and failure…

            Did you know that socialist security is a hose job ON working people…

            More explanation here

          • SS is insurance and SS exists in every industrialized country on the planet except for the 3rd world countries.

            We’re not going to turn into a 3rd world country. Take my word for it.

          • SS is insurance and SS exists in every industrialized country on the planet except for the 3rd world countries“…

            So does that mean that if your friend jumps of a bridge to his/her death you’re going to follow that person?

            We’re not going to turn into a 3rd world country. Take my word for it“…

            Have you been to the urban centers of Chicago, Detroit, Cleveland, Bigingham, etc?

            Your word is bupkis…

        • Slate has a terrific article on how O has the Rs dialed in. A snippet: “The easy knock on the Republican “rebranding” campaign is that it microwaves ideas and gimmicks from previous, partially successful campaigns. This White House makes that harder, because it has an intuitive understanding of what could make Republicans look stupid. The Republicans are aware of this tactic, and they resent it, one of them describing it to me as “finding four people on Twitter and making it look like they speak for us.” ”

          Juandos! Vangel! And two of their friends! Now they are going to disclaim the Rs are as contemptible as the Ds — as if they were dumb enough to form a third party and elect Ds in perpetuity. Hey, wait a minute….

          • Slate has a terrific article“…

            Well todd IMHO that would be an historic first for the clueless, marxist, place holders over there…

            Then again that’s just me…

  2. And it is not just Medicare. The US cannot continue to spend two to three times more on healthcare than its competitors in the global marketplace — $8,200/person/year.

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