Tag Archives: entitlements

Spend, Spend and More Spend

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Few will argue with the idea that federal government spending is out of control. The Heritage Foundation's Federal Spending by the Numbers is a comprehensive look at the situation. We'll share a few of the many bullet points that just make me (and I'm sure many of you) wonder why our political leaders can't realize that the current course is a disastrous one.

  • Over the past 20 years, federal spending grew 71 percent faster than inflation.
  • In 1962, defense spending was nearly half the total federal budget (49 percent); Social Security and other mandatory programs were less than one-third of the budget (31 percent). Two major entitlement programs, Medicaid and Medicare, were signed into law by President Johnson in 1965.
  • In 2012 entitlements were nearly 62 percent of total spending, while defense dropped to less than one-fifth (18.7 percent) of the budget.
  • Federal spending per household reached $29,691 in 2012, a 29 percent increase (adjusted for inflation) from $23,010 in 2002. The government collected $20,293 per household in taxes in 2012.
  • The excess of spending over taxes produced a budget deficit of $9,398 per household in 2012.
  • For every $6.80 the federal government collected in taxes in 2012, it spent $10. Consequently, $3.20 out of every $10 spent was borrowed.
  • Major entitlements (Social Security, Medicare, Medicaid, Children's Health Insurance Program, Obamacare) will increase from 44 percent of federal spending in 2012 to 57 percent in 2022.
  • In 1993, Social Security surpassed national defense as the largest federal spending category, and remains first today.
  • Federal energy spending has increased steadily over the past decade with the government increasingly subsidizing activities like energy efficiency, energy supply, and technology commercialization. An unprecedented $42 billion was spent in 2009 as part of the stimulus, a nine-fold increase over the 2008 spending level.
  • Interest on the debt is the fifth largest federal spending category, even at today’s low interest rates.
  • All entitlements (excluding net interest) total nearly 62 percent of all federal spending today.
  • Spending on the largest, Social Security, Medicare, and Medicaid, will leap from 10.4 percent of GDP in 2012 to 18.2 percent by 2048.
  • The big three entitlements alone will absorb all tax revenues by 2048. Other spending, such as national defense or interest on the debt would have to be financed completely on borrowed money.
  • Medicare is the fastest-growing major entitlement, growing 68 percent since 2002. Medicaid grew 38 percent and Social Security 37 percent.

Unemployment Comp: How Much is Too Much?

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Jobs are — or should be — the number one priority as economic recovery (in that sense) remains elusive. For those currently without jobs, however, how much unemployment compensation is too much? It’s a tricky question, but one that is starting to be asked by more than a few people.

The unemployment comp program, created during the Depression as a temporary aid for laid-off workers, is now termed by some as an "expensive entitlement." While those out of work once received six months of payments, that has now surged to as high as 99 weeks in some states. Half of the more than 11 million unemployed have been jobless for longer than six months.

This is a downturn unlike any other since the program was created and many of those jobs will likely not come back. And while the vast majority are very likely doing all they can to find meaningful employment in the effort to return to their previous lifestyle, nearly two years of unemployment benefits has also undoubtedly led some to adopt the option of "let the government pay the tab" for awhile.

Few seemingly agreed with Kentucky Senator Jim Bunning’s recent filibuster that delayed the latest unemployment benefits extension (he wanted Washington to find a way to pay for it), but his logic was accepted in some circles. Colleague Jon Kyle of Arizona commented that the continued benefits are a "disincentive for people to seek new work" and that no one can argue that the current system is a "job enhancer."

Employers pay the bill through taxes in nearly all states (a few require worker contributions). Benefits have been extended before, but rolled back when the unemployment rate declined. That decline is proving difficult to achieve this time around.

A Washington Post article this week included the following:

"It is appropriate and natural for Congress to extend the time limit of unemployment insurance with the job market as bad as it is," said James Sherk, a labor economist at the Heritage Foundation. "But by quadrupling it, it is no longer an unemployment insurance program but a welfare program."

Phillip L. Swagel, a former Treasury Department official who is now a business professor at Georgetown University, said that some people might take longer to find a new job as a result of unemployment insurance extensions, but that right now it’s a needed benefit.

"The reality is that it’s hard to find a job even for people who really want one," he said.

But as the job market improves, Swagel said, unemployment insurance extensions must be pared back quickly, as they have been in previous downturns. "It’s important to let the extensions lapse as the job market recovers — to avoid having disincentives to work once the job market is better," Swagel said.

Part of the question is timing. For a program that is currently costing $10 billion a month, that’s something that needs answered sooner rather than later.