Much of what you’ve been reading about the Obama budget proposal is dead wrong.
I’ve already noted in a post that next year’s outlays for defense, Social Security, Medicare, and Medicaid will outpace total tax receipts.
In a great column today — Obama’s budget guts the government — Washington Post columnist Robert Samuelson points out that the increasing spending on entitlement programs like Social Security and Medicare will simply crowd out much other government spending.
From Samuelson’s column:
Social Security, Medicare and Medicaid â€” boosted by the aging baby boom and high health costs â€” are relentlessly determining national priorities. Neither Republicans nor Democrats want to discuss this openly. At a press briefing, top administration officials â€” led by Gene Sperling, head of the National Economic Council, and Jeffrey Zients, acting head of the Office of Management and Budget â€” barely mentioned these programs. Thatâ€™s some feat, considering they constitute 44 percent of non-interest spending and are projected to account for 57 percent by 2022.
The paradox is obvious, if unspoken: An avowedly liberal administration is gutting government because it lacks the political will to confront programs for the elderly.
So total federal outlays were 24.1% of GDP in 2011, but will be 22.8% of GDP in 2022 (hitting a low of 22.0% along the way). But three mandatory programs — Social Security, Medicare, and Medicaid — that comprise 9.8% of GDP in 2011 will increase to 11.2% of GDP in 2022.
That means the rest of the federal government will contract as a share of the total economy — security spending will go from 5.6% of GDP in 2011 to 3.4% of GDP in 2022, for example. Other discretionary spending (things like the National Parks, the CDC, NASA, and on and on) would fall from 3.1% of GDP in 2011 to 1.7% of GDP in 2022.
Adjusting the data for inflation and population, we end up with a reduction in all discretionary spending from $1.261 trillion in 2013 to $989 billion in 2021, while mandatory programs (almost entirely dominated by Social Security, Medicare, and Medicaid) increase from $2.293 trillion in 2013 to $2.803 trillion in 2022.
Again from Samuelson:
Granted, none of the political choices (limits on Social Security and Medicare benefits, deep discretionary spending cuts, much higher taxes or large deficits) is appealing to either party. But instead of a real debate on the size and role of government â€” which programs are important, which are ineffective, who deserves benefits, whatâ€™s a tolerable level of taxation â€” we are making choices by omission in a way that exempts the elderly.
All budgetary pressures are being concentrated on (a) the dwindling portion of spending not devoted to the elderly and (b) higher taxes. This is a formula for governmental failure and generational unfairness. Itâ€™s a big story. Someone should pay it heed.