Thursday, July 14, 2011

Entitlements Still Much of the Problem

I've repeatedly shown that the skyrocketing Federal budget deficit mostly is driven by so called "mandatory spending" on entitlements. The OMB calls entitlements "human resources" (see Table 3-1) and defines it to include "Education, Training, Employment, and Social Services, Health, Medicare, Income Security, Social Security and Veterans Benefits and Services." Vets benefits were less than half a percent of total "human resource" spending in 2010--the category is dominated by Social Security, Medicare and Medicaid plus income security (the later includes unemployment benefits, subsidized housing and food stamps, see Table 3-2).

J.E. Dyer at Hot Air disagrees somewhat:
Entitlements are not the problem for the federal debt in 2011.

Now, calm down. Entitlements are a debt problem. But they are not the reason the federal debt has increased 35% under Obama. I’ll say that again. Entitlements are not the reason the federal debt has increased 35% under Obama.

Obama has not added so dramatically to our national debt by putting new money into Social Security and Medicare. His multi-trillion-dollar deficit-fest has not pumped cash into Social Security and Medicare. Do I need to put this in three or four more ways in order to get the point across? Entitlements are a systemic, long-term debt problem, but they are not what has caused the national debt to spiral from 2009 to 2011.

It’s all the Obama spending on other things -- not on the two user-contribution entitlement programs that America’s seniors now rely on -- that has caused the debt to skyrocket.
Dyer is right to fault Obama's increased "discretionary spending" such as the failed stimulus package. But the rising deficit also is driven by shrinking tax revenues beginning with the 2007 credit crunch--as Ed Morrissey says, "we have a recession problem." Contrary to the New York Times, the Bush tax cuts didn't cause the deficit--Federal receipts jumped after the cuts until the recession.

Dyer cites no data--though page 8 of this CBO presentation is somewhat supportive. Here are two charts that challenge Dyer's view:

source: Heritage Foundation

source: NOfP chart via OMB data

As can be seen, entitlements are killing the budget--though they have been for some time. Discretionary spending (including defense) started climbing under Bush, and increased under Obama--which contributes but doesn't necessarily drive the problem.

To be fair, Dyer distinguishes between short-term and long-term budget problem--and favors tackling both. Indeed, cuts in discretionary spending are essential to offset projected growth in entitlements.

Dyer's strongest point is that Hill Republicans shouldn't let Dems define the deficit debate solely as cuts to entitlements. Agreed; Republican prospects in the 2012 election depend on communicating that concept to voters.

(via reader Warren)


A_Nonny_Mouse said...

My stand on addressing the economy is similar to my stand on immigration "reform":

Immigration- SECURE THE BORDERS, DAMMIT; then I'm willing to have the discussion about "normalizing the status of illegal immigrants".

Economy- FOR THE LOVE OF GOD, CUT SPENDING! (*REAL* cuts, not just canceling the implementation of some projected spending increases.)
When the Administration has proved they're serious about cuts, I'm willing to have the unpleasant discussion about "revenue enhancement".

But in both cases-- first things first. The Administration shows its commitment to tackling the problem, THEN "We-the-People" agree to take in in the shorts again without resorting to insurrection. (But if this Admin doesn't get its "my-way-or-the-highway-because-I-Won" butt in gear, I'm not ruling out that Tree-of-Liberty thing.)

OBloodyHell said...

The current budget problem can be solved by suitable use of tree and rope neckties. I have little belief it will get solved by any other means.

I'm still of the opinion that it's too late to fix things, and too early for the hangings... but we're awfully much closer to the latter time frame.

Anonymous said...

Triple or double Social Security payments to the elderly because they need it to survive with minimal dignity and health. The long period of constantly growing income and wealth disparity between rich and poor has destroyed the middle class, substantially increased the number of people in poverty including children and is generally destroying our economy due to the inability of people to purchase the products we are manufacturing. Perhaps it is time to bring back WPA to get the unemployed back to productivity. Increase taxes on the wealthiest 3% of the population and change the estate tax rate to 73% to help solve the national debt crisis created by Republican President George Bush and the financial crisis created by the deregulation of the financial industry by Republican President Ronald Reagan.

Carl said...

Anony: Income equality has been relatively stable--until recently, when the upper quintiles were hardest hit. And tax cuts spur economic growth and increase tax receipts. Look it up.

Anonymous said...

Income and asset disparities between rich and poor have been growing for some time. Look it up.

Maybe it is a myth that tax cuts spur economic growth and increase tax receipts. Right now, as you know, corporations and the rich who are the ones expected to create jobs (spur growth) are simply holding on to their cash. They are doing nothing to spur growth.