Welfare for The Middle Class

 

“The U.S. program that pays elderly Americans’ hospital bills will exhaust reserves in 2028, two years sooner than last year’s estimate, trustees of the program said on Wednesday.”

— Reuters.


In 2015 the federal government collected an all-time record of $3.25 trillion in taxes.  According to the White House Budget Office (see table 3.1), 83% of that sum—almost all of it—was spent on “Human Resources.”   $1.03 trillion dollars was spent on Health Care (Medicare, Medicaid, ACA, etc);  $508 billion went to “Income Security” (disability payments, the cash payments known as the Earned Income Tax Credit);  Social Security cost $888 billion ….

Yes, we all pay into the Social Security system as if we’re paying into a retirement plan.  But all the funds that have ever been collected—even the ones in the “trust funds”—were spent immediately.  The same is true of Medicare.  In June the Medicare trustees said that Medicare will run out of money in 12 years;  and the latest Social Security statements say, in black and white on page 2, that in 18 years you will only receive 79% of the benefits that are shown on page one.

Both systems were designed for a world with lots of Baby Boomers working and paying taxes, and a small population of retired people.  In the future we won’t have as many high-earning workers paying into the system, and we’ll have more retirees to support.  The numbers don’t work.

Most of those “Human Resources” programs are described in Washington as Entitlements.  In a previous letter we printed a CBPP chart which showed that only 32% of Entitlement spending goes to households whose income falls in the bottom 20%.  The New York Times tweaked the numbers, bumping the 32% figure up to 33%, but still asserted that most entitlement spending goes to people who are not poor.

And most of the budget now goes to entitlements.  It’s hard to escape the truth that our federal government is mostly a machine that transfers money from one group of people to another.  The even harder truth is that these transfers are not from rich to poor.

The question that we should ask about each of our redistribution programs is “did politicians, in the past or present, win re-election or election by promising to increase the size of this benefit?”  Promising to protect a large existing benefit also counts …  Many of the programs that they created are now “untouchable” programs that grow rapidly every year, and are not affected by any budget process or other control.

The last recession was seven years ago, but the Congressional Budget Office believes that the final tally for 2016 will show a deficit of $590 billion.  Several years from now, when interest rates are higher, the interest cost on the ever-swelling debt will put a huge hole in the federal budget;  and cause us to slash all these programs.

 

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