And that was before the passage of Obama Care, which creates a new, massive entitlement for people under 65 years of age. Right now, the real cost of Obama Care is not showing up in official projections because of two budget gimmicks. The law assumes that Obama Care entitlements will be paid for by (1) slowing the rate of growth of Medicare to the growth of the economy as a whole and (2) slowing the growth of federal subsidies for the insurance everyone will be required to buy to the growth of the economy as a whole, even though health care costs will be growing at twice that rate.
The first assumption will crumble as soon as seniors discover doctors won’t see them and hospitals won’t admit them and they decide to march on Washington as a result. (See the Medicare Actuaries report.) The second assumption will crumble as soon as everyone else discovers they have been hoodwinked and joins the seniors in their public outrage.
The problem of entitlement spending deficits, by the way, is not something in the distant future. Don’t be misled by “trust funds” that are holding nothing more than IOUs that the government has written to itself. All our entitlement programs are run on a pay-as-you-go basis. Every dollar of payroll tax revenue is spent the very minute, the very second, the very day it comes in the door. And here is the bottom line: we are spending more than we are taking in right now. That is, we are experiencing a cash flow deficit that is growing larger and larger through time.
On the present course, we will need one out of every four general revenue dollars at the federal level to cover the cash flow deficits in Social Security and Medicare by 2020. We will need one in every two by 2030. To balance the budget without raising taxes, the government will need to stop doing about one in four other things it is currently doing in seven years. It will have to stop doing one of every two things it is currently doing in 17 years.
Nate Silver summarizes the state we are in this way:
We may have gone from conceiving of government as an entity that builds roads, dams and airports, provides shared services like schooling, policing and national parks, and wages wars, into the world’s largest insurance broker.
Most of us don’t much care for our insurance broker.
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