Friday, July 25, 2008

The New Big Three: Entitlements

According to the Heritage Foundation, Entitlements are the greatest domestic challenge the nation faces.

These middle class retirement programs, Social Security, Medicaid and Medicare, cost more than $1 trillion annually (about the same as the entire economic output of Canada, the 13th largest ecoomy in the world, see chart above), and will cause federal spending to jump by half, from 20% of the economy to 35% by 2035. This tsunami of spending is a major threat to limited government because it runs on auto-pilot with automatic increases locked in by each program’s governing laws. While other programs are constrained through annual budgets, entitlements get first call on resources. Other goals such as defense or national security must compete for an increasingly smaller share of what’s left.

This "locked in" spending is steadily undermining the economic future of younger generations who face a debt burden of $175,000 per person. The moral and ethical challenge from the entitlement tsunami is undermining our democratic system as more Americans become dependent on the government and other priorities are automatically preempted.

16 Comments:

At 7/25/2008 8:48 AM, Blogger OBloodyHell said...

> younger generations who face a debt burden of $175,000 per person.

Ya hear that ya lazy little bastards? Get to work!!!

:oP

.

 
At 7/25/2008 9:28 AM, Blogger Matt S said...

Egads. No thanks to conservative economic policies for that debt. I know that much of what GWB has done is a big factor in this future debt.
And I know, GWB isn't a true conservative, but no one was stopping you guys from doing something about it, which you didn't.

BTW, I've seen several different charts now showing the national debt growing during the past few republican administrations but shrinking during the clinton years.

I think one was from Krugman, one from a Ross Perot- linked website or something, I forget.

 
At 7/25/2008 9:46 AM, Anonymous Anonymous said...

Matt, I'm not sure what conservative economic policy possibly has to do with these mandatory expenditures. These are entitlements, not the discretionary portion of the budget. These unfunded liabilities continued to escalate throughout the Clinton and Bush years. In fact, of these two presidents, Bush was the only one that offered any substantial changes to the program (during his second term), which was blocked by the Democratic Party. By the way, the national debt, which is what you are referring to, is approximately 8% of the total unfunded Social Security and Medicare liabilities.

Neither party has done much at all to address this elephant in the room.

 
At 7/25/2008 9:50 AM, Anonymous Anonymous said...

federal spending to jump by half, from 20% of the economy to 35% by 2035

Typo: should be 30% by 2035.

Growth in entitlements in chart form from the CBO.

The major long term problem is medicare/medicaid not social security.

 
At 7/25/2008 9:59 AM, Blogger Devin Cheevers said...

http://newtalk.org/2008/07/can-we-afford-our-entitlement.php

 
At 7/25/2008 10:22 AM, Anonymous Fred said...

The party controlling Congress has more to do with the deficit than the President. Budgets are a responsibility of Congress.

 
At 7/25/2008 10:34 AM, Anonymous Fred said...

The leading edge of the Boomer cohort has been working for forty years. That also means they have been paying into SS for forty years.

Boomers are as worthy of their retirement as anyone from any generation.

 
At 7/25/2008 11:15 AM, Blogger Walt G. said...

fred,

You realize what you have paid into SS/Medicare was spent on those older than yourself. Your benefits depend on those younger than you do to likewise. After watching all the saggy pants and other oddities of the younger generation, that’s a scary thought: Isn't it?

On top of paying SS/Medicare for us, the younger generation has to fund their own retirements because of the dearth of defined-benefit plans. I think we all better have some cash set aside or the ability to generate it for our old age.

Does anyone have any brilliant discussion or suggestions for these imminent problems?

 
At 7/25/2008 3:27 PM, Anonymous Anonymous said...

After watching all the saggy pants and other oddities of the younger generation, that’s a scary thought: Isn't it?

No. The generation that preceded you thought about your oddities and that you would amount to a scary thought. Did you?

Solving the medicare/medicaid unfunded liabilities problem will be a combination of higher taxation and lower benefits. Understand it and get used to it.

 
At 7/25/2008 3:40 PM, Blogger Walt G. said...

anon asks: "No. The generation that preceded you thought about your oddities and that you would amount to a scary thought. Did you?"

I scare myself sometimes. However, there were so many of us babyboomers and fewer of them that we were forgiven. Ponzi Schemes work well with that ratio.

 
At 7/25/2008 3:47 PM, Blogger juandos said...

Oh dear! Poor matt s is still stuck in liberal delusion land: "No thanks to conservative economic policies for that debt. I know that much of what GWB has done is a big factor in this future debt"...

Well in one sense you are right about George W who's NOT a conservative (didn't the phrase compassionate conservative give it away?) adding to the debt started by the liberal stars FDR and LBJ...

"I think one was from Krugman"... ROFLMAO!

What's next? A hot flash from the Easter Bunny?

Personally I think the Heritage Foundation is being excessivly optimistic here with their :federal spending to jump by half, from twenty percent of the economy to thirty percent by 2035...

Maybe it due to the fact that the Heritage folks are only talking about the federal part of the problem...

In 2006 William Beach of the Heritage Foundation had the following: The 2006 Index of Dependency

The meat of his paper:

Using a benchmark index of 100 for 1980, the Dependency Index for 2005 stands at 238, a 6.42 percent increase over the 2004 score of 224

. Since 1980, the Index has more than dou­bled, increasing by 138 percent.

. Federal spending on educational subsidies has risen by 127 percent since 1980, growing by 21 percent in 2005 alone.

. The Index's health and welfare component has risen by 200 percent since 1980 and by 36 per­cent from fiscal year (FY) 2000 through FY 2005.

. Finally, recovery spending for Hurricane Katrina increased outlays in the Index's rural and agri­cultural services component. Direct federal outlays and outlays to states for disaster relief drove increases in this component.

walt g asks the question: "Does anyone have any brilliant discussion or suggestions for these imminent problems?"...

How about federal dollars being wasted on housing, education, school lunch and so on and so forth (a.k.a. discretionary spending) being used to pay off everyone who won't be getting SS and medicare/medicaid in the future?

Last year Mike Franc of the Heritage Foundation writting in Human Events said Last year, President Bush’s top budget official told a congressional panel that within a decade “deficits stemming largely from entitlement programs such as Social Security and Medicare will begin to rise indefinitely. No plausible level of spending cuts in discretionary programs [everything from education to housing and highways to national defense] or tax increases could possibly solve this problem.”

 
At 7/25/2008 11:07 PM, Blogger bobble said...

assume the the amount spent on the iraq war was applied to the entitlement tab. how would we be doing then?

 
At 7/26/2008 2:17 AM, Blogger OBloodyHell said...

> And I know, GWB isn't a true conservative, but no one was stopping you guys from doing something about it, which you didn't.

Actually, as the election of 2006 shows, a lot of people WERE rather displeased with the current crop of "conservative" politicos, almost all of whom had managed to utterly ignore the principles they'd gotten elected to support, in almost every single way.

> I'm not sure what conservative economic policy possibly has to do with these mandatory expenditures.

To agree with him slightly, policy, as you suggest, is what it should be. Implimentation (which is what he really refers to) has been massively less than adequate. The GOP had sufficient control over both houses that they could have forced the Social Security issue past the threat of a Dem filibuster. They went all French on us and failed to do jack shit.

So the current crop of "conservatives" in many ways have shown themselves to be far more identically pandering political horses patooties to the Dems than they should have been.

In short: matt, the policies are fine. The politicos are the things that suck.

 
At 7/26/2008 2:27 AM, Blogger OBloodyHell said...

> The leading edge of the Boomer cohort has been working for forty years. That also means they have been paying into SS for forty years.

Boomers are as worthy of their retirement as anyone from any generation.


What part of Ponzi Scheme are you not grasping?

It does not matter WHO runs it. An individual, a company, or a government --

A Ponzi Scheme is inherently doomed.

Someone will get screwed, sooner or later.

Since the Boomers have been blatantly warned for the last 30+ yeears that the system needed to be completely overhauled or it was going to screw people over, but they have fought tooth and nail to prevent such an overhaul, what makes you think they deserve ANY recompense?

Better to screw the boomers than saddle the grandkids of boomers with an insane level of taxation just to try and float a rubber raft with a six-inch hole below the waterline.

Screw 'em. They knew the raft was a Swiss Cheese. Let 'em sink or swim on their own.

 
At 7/26/2008 2:35 AM, Blogger OBloodyHell said...

> BTW, I've seen several different charts now showing the national debt growing during the past few republican administrations but shrinking during the clinton years.

This, matt, is a crock. During the Clinton admin, the best they achieved was to reduce the RATE of GROWTH of the national debt. That's the first derivative of the debt vs time, not the debt itself.

The machine has been hurtling towards the cliff all along* -- All Clinton did was (at most) to slow it down a bit. And the real fact is that, after the massive growth of the economy during the Bush admin, the increased income from taxes on additional profits have counterbalanced the expenditures, for much the same result as Clinton -- a reduction in rate of growth, but not a reduction.


============================
*(possibly, assuming standard economics were right, which I'm not going to argue here, but can make a case against)

 
At 7/26/2008 2:07 PM, Blogger juandos said...

Could THIS be considered America's version of socialized medicine that some think we need?

 

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