The Corner

What’s Missing from the Debt Deal: Entitlement Reform

Spending on autopilot programs like Social Security, Medicare, and Medicaid is the main driver behind this increase over the historical baseline. This chart illustrates the problem we face. Under current law, CBO projects that spending on Social Security and major health care programs — mainly Medicare, Medicaid, Children’s Health Insurance Program — would be 12.2 percent of GDP in 2021; a 70 percent increase relative to the historical average. All spending apart from this and interest payments on the debt have averaged 11.5 percent of GDP during the past 40 years. That broad category includes defense (largest single item), food stamps, unemployment compensation, veteran’s benefits, transportation, and other programs.

As you can see, while entitlement programs (and interest payments) are consuming a larger share of the wealth created, all other spending is shrinking. We can continue to fuel the spending fire — and ignore these chilling facts — or we can reform these programs. The debt deal unfortunately failed to address these pressing issues in spite of warnings from the rating agencies. We can only hope that now that the cash flow crisis is been averted (it never was a default crisis), Congress will finally focus on this key problem.

Here is great post by Kevin Williamson about what needs to be done as soon as the president signs the debt deal.


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