More Than We Paid For

Rich Tucker
|
Posted: May 07, 2011 12:01 AM

My grandparents had a sign on the wall: “Thank God we don’t get all the government we’re paying for.” How quaint, how very 1980s, that seems now.

These days the biggest problem isn’t that we pay too much for government (although we do). It’s that we get so much more government than we’re willing to pay for. We then borrow the difference.

How large is the problem? Last year “a record 18.3 percent of the nation’s total personal income was a payment from the government for Social Security, Medicare, food stamps, unemployment benefits and other programs,” USA Today reports. That’s up from an average of 12.5 percent from 1980 to 2000. “Americans got an average of $7,427 in benefits each in 2010, up from an inflation-adjusted $4,763 in 2000 and $3,686 in 1990.”

Of course, we didn’t each kick in $7,427 in taxes to pay for those benefits. So in order to provide them, Washington borrowed lots of money. “Over the 12 months ending January 31, 2011 the Treasury borrowed a total of $1.8 trillion, or approximately $5 billion per day,” calculates CNS News.

The problem is only going to get bigger unless our government changes course. Consider the things we’re borrowing money to pay for: USA Today adds that 80 percent of federal spending went for Social Security, Medicare, Medicaid and unemployment insurance. Of those, the first three are entitlement programs. That means they grow year after year, even though members of Congress never actually vote to spend more on them.

So, absent reform, there’s more spending on the horizon. “What’s frightening is the Baby Boomers haven’t really started to retire,” University of Michigan economist Donald Grimes told USA Today. “That’s when the cost of Medicare will start to explode.”

Many experts doubt that American policymakers have the stomach to control their spending. Recently, Standard & Poor’s warned that the U.S. government might eventually default on its bonds. Meanwhile, “Pimco’s Total Return Fund, the world's biggest bond fund, has dumped all U.S. government-related securities, including U.S. Treasurys and agency debt,” CNBC reports. The fund’s manager encourages investors to buy “safe” bonds, so he’s clearly worried about the American government’s ability to pay off its debt.

Meanwhile, it only makes sense that as the scope of American entitlements grows, the amount of American economic output is going to decrease. Most entitlement recipients are retired, and retirees, by definition, don’t generate a lot of goods.

So how can we change the future? The first step would be to reform entitlements. Take them off autopilot. Force lawmakers to actually vote how much they’re willing to spend on Social Security, Medicare and Medicaid each year. Then force them to cut discretionary spending: transportation, energy, agriculture and all the rest until the budget is balanced.

As a step in that direction, Rep. Paul Ryan has announced a plan that would transform Medicare into a voucher program. As ABC News explains, “Under Ryan's plan, new Medicare beneficiaries in 2022 could select from a list of guaranteed coverage options, and the government would provide money to subsidize the cost of that plan.”

This would quickly create a market in policies for the aged, and could help hold down healthcare costs. At the least, it would limit the federal government’s financial responsibility, which as things stand now is virtually unlimited. President Obama opposes the Ryan plan, but hasn’t outlined a specific plan of his own.

As columnist Michael Kinsley warned recently, it’s time to force lawmakers to reduce the deficit. “If the deficit doesn’t matter, why have any taxes at all?” he asked in the L.A. Times. “And if there is some point at which the deficit does start to matter, and become dangerous, when is that point if $1.6 trillion isn’t it?”

Here are other questions policymakers ought to answer. How much borrowing is too much? And, How are we ever going to be able to pay back all we’ve already borrowed?

“If, as the enlightened voices on the left contend, the American people deeply love their federal services, their dependency programs, their regulations, their industrious public education department, let’s all pay,” columnist David Harsanyi writes.

Otherwise, let’s slash spending so we won’t need to borrow $5 billion every day. And get back to a point where we can at least afford all the government we get.