Entitlement Reform: A Grim Fairy Tale

The prospect of a far-reaching budget agreement from the Congressional "super committee" is looking more every day like another Washington fairy tale.  With a November 23 deadline looming, the 12-member panel seems destined to fumble the opportunity to end runaway deficits.

Many political pundits are blaming partisan bickering for the gloomy outlook.  They are only half-right.  There likely will be no overarching deal, but it will be because President Obama has no intention to be party to any agreement that reduces funding for Social Security, Medicare and Medicaid.  

The president long ago signaled his intentions.  In February, he was asked why his proposed 2012 budget failed to tackle soaring entitlement spending.  He dodged responsibility, tossing the issue back in the laps of lawmakers to hammer out a deal to fix entitlements.

"If you look at the history of how these deals get done, it's typically not because there's an Obama plan out there," the president said at a news conference.  In other words, Americans should not look to their leader for solutions to thorny issues when they can be sloughed off to another branch of government.

As written in this space months ago, President Obama clearly intends to make saving Social Security, Medicare and Medicaid a key plank in his reelection campaign.  A bipartisan deal robs the president of stump speeches accusing Republicans of trying to scuttle entitlements for seniors.  

Politics aside, without drastic entitlement reform, nothing can be done about the yawning budget deficits.  No amount of tax increases would bring spending in line with revenues.  The math doesn't work, no matter how many times Obama and the Democrats trot out the line about millionaires paying more taxes.

For starters, the sheer size of entitlement costs dwarfs all discretionary programs.  In 2011, all spending on entitlements topped $2 trillion, exceeding all the taxes collected by the federal government.  That figure includes not only the Big Three, but also food assistance, unemployment insurance and smaller aid programs.

Only a few years ago, the budget picture was not so dire.  In 2007, federal revenues exceeded mandatory entitlement spending by $1.17 trillion.  The following year, the last of the Bush Administration, tax revenues covered entitlements with $914 billion to spare.


Since Obama assumed the presidency, the situation has reversed as deficits have swamped the nation's tax resources.   Under President Obama's latest budget, entitlement spending is pegged at $2.109 trillion this fiscal year, widening the deficit.

Entitlements costs trend sharply upward in future years.  Obama's own forecasts show entitlement spending will reach $5.7 trillion by 2021, nearly triple this year's budget.  If the estimates are accurate, the cumulative deficit with top $7 trillion by that year.    

The astronomical increases are expected to occur as the population ages and health care costs continue to escalate.  The problem will be exacerbated by the fact there will be fewer workers per retiree paying taxes into Social Security, Medicare and Medicaid.

Unlike discretionary spending, entitlement expenditures are mandated in the budget.  That means Congress has no authority to cut entitlement budgets.  Each year's budget is based on several factors, including estimates of expenditures and the anticipated number of recipients.   The only way lawmakers can address entitlements is to change the laws that created the programs.  

If every discretionary spending program, including national defense, ended tomorrow the nation would still have to trim entitlements to lower deficits.  To underscore that point, since 1976 entitlement spending has eclipsed budget expenditures on national defense in every fiscal year.  In 2011, entitlement expenditures were three times larger than the military budget.

Despite all the evidence supporting the need for entitlement reform, the president and his party seem oblivious to the obvious.  That's why no one should expect comprehensive entitlement reform as part of any deal to meet the objective of reducing the deficit by at least $1.2 trillion over the next decade.

Instead, the committee will produce a modest plan polished with eye-popping dollar signs aimed at duping the public into thinking Congress has taken bold steps to prune creaky entitlements. However,  in the fine print you will likely read that entitlements survive unscathed with only minor tweaks while discretionary items shoulder the brunt of the budget snipping.

Once the deal is announced, the media will gush over the "landmark" agreement.  Credit rating agencies won't be fooled, however, and will likely downgrade U.S. debt.  For his part, the president will sharpen his attacks on Republicans, blaming them for not raising taxes on the rich and threatening to end entitlements for seniors.

Hopefully, most Americans will see through the shabby political charade.  Those who don't will be ones who still believe in fairy tales.