Tuesday, June 17, 2014

CBO Graphics: Part IV 'What Are 'Mandatory Programs' Anyway?'

'I propose a lockbox for Social Security'
'Mandatory programs in the federal budget are an easy way for politicians to avoid making tough decisions'

What politicians are saying when they say they won't touch mandatory programs is this:

'They are too tough politically for me to do anything about them! The AARP, the NAACP, the ACLU...they'll kill me in the next election if I say we have to reform Social Security, Medicare and Medicaid!

When politicians say a program is an 'entitlement' or 'mandatory' and they 'can't touch them', they are flat-out lying through their teeth.

They are the US Congress and US Senate, for gosh sakes! The US Constitution gives them massive power to do just about whatever they want, assuming they can get to 50%+1 in each chamber, that is, including reforming, cutting, changing, adding to or subtracting from any entitlement program now in force in America.

We participated in such a process dozens of times. It is called 'budget reconciliation' and it is a term you have rarely heard during the Obama Administration except for one glaring example: when they used budget reconciliation to cram Obamacare down the over-matched GOP minority's throats.

'Mandatory' programs are considered 'benefit' programs based on formulas and meeting such thresholds as age 66 (for SS); 65 (Medicaid) or living at or below federal poverty levels (Medicaid).

There is no other consideration other than meeting these standards to be eligible to receive benefits.

The one glaring truth of the matter is that if we would just arrest the rate of inflation in health care delivery in America to around the general rate of inflation in the rest of the economy, we could balance the federal budget in no time flat.

No kidding. We have written about this in great depth in past posts but the bottom line is that the upward explosive growth in Medicare and Medicaid, as well as the military health programs and the VA to some smaller extent, are the most prominent upwards cost-drivers in the federal budget and have been for much of the past 4 decades.

Take a close look at the infographics below detailing the growth in entitlements from 1993-2013.

Mandatory spending account for 67% of ALL federal spending in 2013 or about 5.2% of GDP. 20 years ago, mandatory spending account for 2.6% of GDP in 1993. Mandatory spending has doubled as a share of GDP in 20 years.

Medicare alone has grown 66% relative to its share of GDP during that time. Medicaid has expanded about 45% as a share of GDP during the same period of time, from around 1.3% to 1.8% of GDP.

SS has expanded about 10% in terms of its percentage of GDP consumed during that time, mostly because so many Boomers got older and started retiring. It would have gone up faster expect for the steady increase in the retirement age set into motion in the 1983 SS Reform Act where the retirement age went up from age 65 to age 66 in small increments from 1984 to now.

You didn't even notice it didja? We think it should go up on the same scale to age 67 in the next 5 years and then eventually to 70 since we are living so much longer lifespans.

But other than those health care-related programs and to a lesser extent, SS, entitlements are relatively tame by comparison. Sure, they are still huge programs but they are not the factors driving up the federal deficits and therefore the debt.

Forget the 'trust' (sic) funds cause they don't exist.

Forget the 'Social Security Surplus' cause that is just a made-up moniker to disguise the fact that the 1983 SS Act raised payroll taxes WAY over what was needed to fund the retirees from 1984 to about 2007 before the surplus started drying up.

Forget any sort of 'lockbox' despite what VP Al Gore said in 2000:

Entitlement programs are just like any other federal program in history: The IRS takes taxpayer money which is used to pay for the programs Congress authorizes. Politicians can't hide behind the 'mandatory' facade any more and we as voters shouldn't let them.

There is no way the American people are going to tolerate a major hike in their payroll taxes, are they? The only way to deal with the rate of growth in spending in SS, Medicare and Medicaid is to deal with the rate of growth in spending!

Senior Boomers had better hope that the foreign credit lines stay open through their retirement because without it, benefits will start to be pared back and in some cases, quite substantially.

We believe there are a million ways to restrain the growth of Medicare. For example, we just heard that a senior we know who is about 70 years old is going to have 1) knee replacement surgery followed by 2) hip replacement surgery later this year.

All paid for by Medicare.

We don't know exactly what the costs of each surgery will be but we have heard that knee replacement surgery can cost upwards of $65,000 and hip replacement surgery can cost over $85,000.

This 70-year old guy is going to have $150,000 of your taxpayer money (and what we can borrow overseas) put into his right leg this year!

All we can say is: 'He better win the Boston Marathon next year! Cause we sure are investing a heckuva lot of American taxpayer resources into his right leg to do so!'

Study these charts below. They are important to understand. Show them to all your friends of all ages.

We are all in this together. We better figure out how to fix it all together before paying interest on the debt/deficit bomb does it for us.

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