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View Full Version : Economics Entitlements really the 'immediate' issue ??


Chiefshrink
08-29-2011, 10:09 PM
Spending, not entitlements, created huge deficit
byByron York Chief Political CorrespondentpostedAugust 22, 2011 at8:05pm

(AP photo)It's conventional wisdom in Washington to blame the federal government's dire financial outlook on runaway entitlement spending. Unless we rein in Social Security, Medicare and Medicaid, the conventional wisdom goes, the federal government is headed for disaster.

That's true in the long run. But what is causing massive deficits now? Is it the same entitlements that threaten the future?

Yes, say some conservatives who favor making entitlement reform a key issue in the 2012 campaign. "We're $1.5 trillion in debt," Weekly Standard Editor Bill Kristol said Sunday, referring to this year's projected deficit. "Where's the debt coming from? It's coming from entitlements."

There's no doubt federal spending has exploded in recent years. In fiscal 2007, the last year before things went haywire, the government took in $2.568 trillion in revenues and spent $2.728 trillion, for a deficit of $160 billion. In 2011, according to Congressional Budget Office estimates, the government will take in $2.230 trillion and spend $3.629 trillion, for a deficit of $1.399 trillion.

That's an increase of $901 billion in spending and a decrease of $338 billion in revenue in a very short time. Put them together, and that's how you go from a $160 billion deficit to a $1.399 trillion deficit.

But how, precisely, did that happen? Was there a steep rise in entitlement spending? Did everyone suddenly turn 65 and begin collecting Social Security and using Medicare? No: The deficits are largely the result not of entitlements but of an explosion in spending related to the economic downturn and the rise of Democrats to power in Washington. While entitlements must be controlled in the long run, Washington's current spending problem lies elsewhere.

A lot of the higher spending has stemmed directly from the downturn. There is, for example, spending on what is called "income security" -- that is, for unemployment compensation, food stamps and related programs. In 2007, the government spent $365 billion on income security. In 2011, it's estimated to spend $622 billion. That's an increase of $257 billion.

Then there is Medicaid, the health care program for lower-income Americans. A lot of people had lower incomes due to the economic downturn, and federal expenditures on Medicaid -- its costs are shared with the states -- went from $190 billion in 2007 to an estimated $276 billion in 2011, an increase of $86 billion. Put that together with the $257 billion increase in income security spending, and you have $343 billion.

Add to that the $338 billion in decreased revenues, and you get $681 billion -- which means nearly half of the current deficit can be clearly attributed to the downturn.

That's a deficit increase that would have happened in an economic crisis whether Republicans or Democrats controlled Washington. But it was the specific spending excesses of President Obama and the Democrats that shot the deficit into the stratosphere.

There is no line in the federal budget that says "stimulus," but Obama's massive $814 billion stimulus increased spending in virtually every part of the federal government. "It's spread all through the budget," says former Congressional Budget Office chief Douglas Holtz-Eakin. "It was essentially a down payment on the Obama domestic agenda." Green jobs, infrastructure, health information technology, aid to states -- it's all in there, billions in increased spending.

As for the Troubled Assets Relief Program, or TARP -- it has no specific line in the budget, either, but that is because it was anticipated to pay nearly all of its own cost, which it has.

Spending for Social Security and Medicare did go up in this period -- $162 billion and $119 billion, respectively -- but by incremental and predictable amounts that weren't big problems in previous years. "We're getting older one year at a time, and health care costs grow at 7 or 8 percent a year," says Holtz-Eakin. If Social Security and Medicare were the sole source of the current deficit, it would be a lot smaller than it is.

The bottom line is that with baby boomers aging, entitlements will one day be a major budget problem. But today's deficit crisis is not one of entitlements. It was created by out-of-control spending on everything other than entitlements. The recent debt-ceiling agreement is supposed to put the brakes on that kind of spending, but leaders have so far been maddeningly vague on how they'll do it.

This issue could be an important one in the coming presidential race. Should Republicans base their platform on entitlement reform, or should they focus on the here and now -- specifically, on undoing the damage done by Obama and his Democratic allies? In coming months, the answer will likely become clear: entitlements someday, but first things first.

Byron York, The Examiner's chief political correspondent, can be contacted at byork@washingtonexaminer.com.

patteeu
08-29-2011, 10:58 PM
There isn't an immediate issue in the sense that the current deficit is killing us. The real issue is entitlements. The immediate issue is the entitlement problem we face in the future. The longer we wait to fix it, the worse it becomes. If we didn't have the entitlement problem heading at us like a deficit-busting freight train, the current year's deficit, as astronomical as it is, wouldn't be a problem.

Several years ago, I bought the house I'm sitting in right now. I'd never spent so much more than my family's annual income in a single year in my life. I had to borrow from the Chinese to do it (actually, I borrowed from Washington Mutual, iirc). That wasn't a problem because I expected to be able to earn enough to service the debt and pay down the principle over the next 30 years. I didn't have a problem. I would have had a problem, though, if in addition to buying the house, I had previously existing contractual obligations for huge payouts that my income wouldn't support over that 30 year period already.

We can't afford the entitlements as they are currently structured. We certainly can't afford them on top of the new level of spending that our current president has established as a base.

patteeu
08-29-2011, 11:03 PM
The most important thing to take from York's column is that getting the economy growing should be the top priority for deficit hawks. Our financial issues will not be solved in a satisfactory way if the economy continues to be mired in the low/non-growth range.

whoman69
08-30-2011, 10:56 AM
You forget in past years most of the deficit reduction was done by robbing funds from those entitlement programs. It would be like someone starting a college fund, using it to pay the mortgage and then saying its the cost of the college fund that is bankrupting them.

Ace Gunner
08-30-2011, 12:43 PM
There isn't an immediate issue in the sense that the current deficit is killing us. The real issue is entitlements. The immediate issue is the entitlement problem we face in the future. The longer we wait to fix it, the worse it becomes. If we didn't have the entitlement problem heading at us like a deficit-busting freight train, the current year's deficit, as astronomical as it is, wouldn't be a problem.

Several years ago, I bought the house I'm sitting in right now. I'd never spent so much more than my family's annual income in a single year in my life. I had to borrow from the Chinese to do it (actually, I borrowed from Washington Mutual, iirc). That wasn't a problem because I expected to be able to earn enough to service the debt and pay down the principle over the next 30 years. I didn't have a problem. I would have had a problem, though, if in addition to buying the house, I had previously existing contractual obligations for huge payouts that my income wouldn't support over that 30 year period already.

We can't afford the entitlements as they are currently structured. We certainly can't afford them on top of the new level of spending that our current president has established as a base.


maybe find your own article and create your own thread. this one went right over your head.

patteeu
08-30-2011, 02:25 PM
You forget in past years most of the deficit reduction was done by robbing funds from those entitlement programs. It would be like someone starting a college fund, using it to pay the mortgage and then saying its the cost of the college fund that is bankrupting them.

Even if every dollar ever collected for SS and Medicare was safely stowed away in Al Gore's lockbox, the entitlements would be headed for insolvency and would ultimately drag the entire federal financial house down with it. The fact that these funds have already been spent just makes the point of overall federal insolvency come sooner.

Don't get me wrong. I'm in favor of dramatically reducing spending elsewhere and of facilitating economic growth in order to grow revenues. But the real financial problem that we face isn't the current deficit, it's the entitlement cost growth curve that has yet to be addressed in a serious way.

vailpass
08-30-2011, 02:58 PM
maybe find your own article and create your own thread. this one went right over your head.

Maybe shut the fuck up and sit the fuck down at teh n00b table.