Why Entitlement Spending Matters

It now accounts for more than half of the federal budget.

By Jason Hughey
Published: October 5, 2012 4:09 PM

The nineteenth-century French political economist Frederic Bastiat once provided a keen insight regarding redistributive government programs. He said that, “If such a law — which may be an isolated case — is not abolished immediately, it will spread, multiply, and develop into a system.” Bastiat went on to say that in France the existence of such programs had indeed multiplied into a system, spawning a “present-day delusion” that resulted in “an attempt to enrich everyone at the expense of everyone else; to make plunder universal under the pretense of organizing it.”

Today’s defenders of liberty and free markets find themselves in the midst of a similar climate. It’s hard to find anyone who even admits that the entitlement state is broken, much less someone who wants to significantly whittle it down. It’s easy to get riled up over pork projects, earmarks, waste, duplication, and foreign aid. Yet, even when combined, these aspects of the federal budget represent a mere fraction of overall federal spending. In order to actually reduce the size of the federal government, Americans have to be willing to go beyond political talking points.

Entitlement spending was entrenched in the federal budget during the days of the New Deal, when Franklin Roosevelt pushed Social Security through Congress, despite popular opposition. President Roosevelt also championed unemployment relief and a host of other welfare programs. Lyndon Johnson added to the entitlement state with his Great Society, which spawned Medicare, Medicaid, and the “War on Poverty.”

Since then, we’ve witnessed entitlement spending continue to grow, regardless of which party has controlled the White House or Congress. In 2011, according to the Center for Budget and Policy Priorities, Social Security, Medicare, Medicaid, CHIP, and other safety-net programs cost a combined $1.9 trillion, or 54% of the $3.6 trillion federal budget. Out of that amount, Social Security cost $725 billion and Medicare and Medicaid cost a combined $835 billion.

Over the long run, this overgrown entitlement system is simply unsustainable. The CBO just released a report stating that the Social Security trust fund will exhaust its IOUs by 2034. The Social Security trustees give it even less time than the CBO, pegging Social Security’s insolvency date a year earlier in 2033. Meanwhile, Medicare could go insolvent as soon as 2016. The best-case scenario, barring major reforms, is that it stays afloat until 2024.

Most alarmingly, many politicians and voters still haven’t faced up to the fact that the entitlement state is broken. We need to gradually reform these programs so that they’re around for younger generations. Otherwise, these programs will continue to drift along as usual until they hit their own proverbial fiscal cliffs, leaving everyone hanging out to dry.

Although cutting entitlement spending may be one of the more politically challenging steps to take in the current environment of Washington politics, it has to be a part of any realistic solution to restraining reckless government spending and restoring economic liberty. We have already ignored Bastiat’s warning to our detriment, allowing these programs to multiply into an unsustainable system based upon an unrealistic delusion. We cannot continue to do so for much longer.

Jason Hughey is a policy analyst for Americans for Prosperity.