Trump fails to see the real budget problem
Our nation has a financial problem. We are in debt to the tune of 20 trillion dollars. This in a country whose GDP is 18 trillion dollars.And with our continued insistence on deficit spending, we are going to be unable to dig ourselves out of a hole we continually enlarge.
But President Trump has a plan, or so he says, to make 10 trillion dollars in budget cuts over the next ten years. And I applaud the things he plans to cut. For example, the Corporation for Public Broadcasting, the National Endowment for the Arts, and the Legal Services Corporation would be eliminated, and the budgets for agencies such as the Departments of Energy and Commerce would be slashed. All worthy and necessary goals; the problem is it can’t be enough.
If he were to cut all non-defense discretionary spending, that would amount to only about 16 percent of the federal budget. Cutting it all, even if politically possible, would get nowhere near his proposed level of cuts. Nor would defense, which was also about 16% of the budget. Elimination our entire military wouldn’t put a significant debt in our problem.
The only way to cut enough of the budget to make a dent in our debt is to take a look at Social Security and Medicare/Medicaid. The two of them combined are facing deficits of some 80 trillion dollars in the near future. These are the programs that are causing our debt crisis. In FY 2015, SS and Medicare accounted for 2.3 trillion dollars of spending, or about 60% of all federal spending.
The first SS recipient paid in a total of 25 bucks into SS. After retirement, the government paid her some 23000 dollars in benefits. One is tempted to draw a Santayana-esque lesson from that. You know, not learning from history and all. This year, there is a difference of some 84 billion dollars between FICA payments into the system, and payments made to beneficiaries. That shortfall is made up by investment income on federal T-bill owned by the SSA. However, that will change over the next few years as the shortfall gets bigger and the SSA is forced to sell those T-bills to fund payments to beneficiaries.
There are varying projections, of course, depending on whom you talk to, on when the program will exhaust it’s resources. Some say 2020, others say 2030 0r 2034. But one thing is clear; the liabilities of SS/Medicare will have to be addressed before the economics become completely unmanageable.
Trump may have made some grand promises about knocking down our debt, but unless we undertake radical reforms of SS/Medicare, we will continue to deficit spend ourselves into insolvency.