Dan

Calabrese

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April 6, 2009

Reform Entitlements or Forget About Ever Balancing the Budget

If you’re going to offer a budget as an alternative to one that explodes federal spending and carries record-shattering deficits, why not propose a balanced budget, or better yet, one with a surplus?

House Republicans didn’t come anywhere close to doing this last week. Of course, any such proposed budget would be a fantasy. That’s because the one segment of the budget that is largest and most out of control – mandatory entitlement spending – is the segment current law doesn’t permit anyone to tackle. And until we have a congressional majority and a president with the courage to change that, entitlement spending will leave the nation spiraling toward bankruptcy and economic collapse.

It was painful to listen to Congressman Paul Ryan of Wisconsin, the ranking Republican on the House Budget Committee, proclaim that the GOP alternative produces deficits only half that of President Obama’s deficits over 10 years. The GOP deficit for 2009 is $1.7 trillion, compared with Obama’s $1.8 trillion. It’s hard to decry the most massive deficit in the nation’s history – by far, at that – when your own proposal doesn’t do much better.

Over 10 years, the Republican alternative envisions deficits an average of only $330 billion less than Obama’s. Obama’s annual deficits soar well above $1 trillion as far as the eye can see, so the GOP alternative is merely a slightly smaller disaster.

But that’s because entitlement spending, mandated by permanent federal law, runs further out of control with every passing year – and we have already reached the point where there is no way to fund it without borrowing recklessly or taxing at rates that would permanently cripple the economy.

So we are borrowing recklessly – something we can’t do forever. And at the rate mandatory entitlement spending is growing, that is going to become a very big problem very soon.

Ryan puts a positive face on the numbers with a professorial explanation based on percentage of GDP, and he may be correct in arguing that public debt totaling only 60 percent of GDP – as envisioned in the Republican plan – is far preferable to a debt that reaches 100 percent of GDP by 2040, as Ryan argues will happen if spending remains on its current trajectory.

But the spending hawk, who reads the Republican proposal as we’re-less-irresponsible-than-they-are, will surely ask: Weren’t we running surpluses less than a decade ago, when Newt Gingrich ran the House and Bill Clinton was president? Why can’t we do that now?

Ryan doesn’t say this (although he should), but the answer is simple: It’s impossible, at least without raising taxes to the point where you would finish off the economy forever. Here are the numbers:

• Total federal outlays for FY 2009 are proposed by the president at $3.9 trillion.
• Social Security, Medicaid and Medicare alone total $1.43 trillion in 2009. Throw in assorted “other mandatory programs,” and entitlement spending tops $2.1 trillion. That’s more than half the entire budget.
• Interest on the debt is more than $400 billion.
• By 2019, Obama’s budget projects mandatory spending to rise above $3 trillion a year.
• Defense spending in Obama’s budget is $593 billion for 2009.
• After TARP and other “financial stabilization efforts,” you’re left with only $528 billion in non-defense discretionary spending.

There’s your problem. Mandatory spending is four times larger than non-defense discretionary spending. Even the gargantuan federal deficit is not as large as the total amount that will be spent on mandatory entitlements. And the best the GOP alternative budget can do with entitlements, given their mandatory nature, is limit their growth to an annual average of 3.9 percent.

You could eliminate all defense spending, all domestic discretionary spending and even the TARP money, and you still would not be able to balance the budget.

Ryan’s plan hopes that keeping taxes low, limiting the growth of entitlement spending and freezing all other spending will spur enough economic growth that we can keep public debt at a manageable level until growth makes it possible to actually balance the budget again.

Of course, the only real solution is to completely reform these entitlement programs and find a private-sector solution to the question of caring for the elderly. When Franklin Roosevelt created Social Security, we had more than 40 people working for everyone one retired person drawing benefits. Today, the ratio is three-to-one and getting narrower.

America simply can’t keep this promise any longer. The only question is whether we will admit that to ourselves before we destroy our entire economy trying to pretend otherwise.

© 2009 North Star Writers Group. May not be republished without permission.

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