Are Entitlements Programs Responsible for Rising Deficits?

In the article McConnell Blames Entitlements, Not GOP, for Rising Deficits, it is revealed that Senate Majority Leader Mitch McConnell recently “blamed rising federal deficits and debt on a bipartisan unwillingness to contain spending on Medicare, Medicaid and Social Security.”

Does his claim hold water, or is he lying?

Evidence

I Googled for “do entitlements programs contribute to debt” and “money borrowed from social security.” The following is a summary of what I found.

 


  • Budget Deficit and Entitlements: The Grand Delusion

    A key quote from this article is as follows.

    What this means is that cutting entitlements will not be a major part of closing the nation’s very formidable looming budget deficits unless Americans are prepared to renege on the commitment to assure the elderly and disabled basic income and health coverage.


  • A debt crisis is coming. But don’t blame entitlements.

    Key quotes from this article are as follows.

    The deficit, of course, reflects the gap between spending and revenue. It is dishonest to single out entitlements for blame. The federal budget was in surplus from 1998 through 2001, but large tax cuts and unfunded wars have been huge contributors to our current deficit problem. The primary reason the deficit in coming years will now be higher than had been expected is the reduction in tax revenue from last year’s tax cuts, not an increase in spending. This year, revenue is expected to fall below 17 percent of gross domestic product — the lowest it has been in the past 50 years with the exception of the aftermath of the past two recessions.

    There is some room for additional spending reductions in these programs, but not to an extent large enough to solve the long-run debt problem. The Social Security program needs only modest reforms to restore its 75-year solvency, and these should include adjustments in both spending and revenue.”

    Medicare has been a leader in bending the health-care cost curve. Reforms to payments and reformed benefit structures in Medicare could do more to hold down its future costs.”

    This article mentions that “Medicare has been a leader in bending the health-care cost curve.” The article What does it mean to “bend the health-care cost curve?” explains that without Medicare things would be far worse because health care costs would be even higher than they are now.

     

  • National debt: Why entitlement spending must be reined in
    This article seems to support the claim made by Mitch McConnell. But it primarily focuses on Medicade as an expensive program. Here are two quotes that support the claim made by the aforementioned Washington Post article that Social Security is not the problem.

    Social Security is another story. It has not contributed to the accrual of the country’s current debt load.

    In fact, Social Security has helped to keep federal deficits lower than they otherwise would have been because the federal government borrowed the surplus revenue paid into the program since the 1980s. And federal spending on the program is expected to grow much more slowly than on Medicare.

  • Key Drivers of the Debt
    This article mentions two key factors that contribute to dept; America’s demographics and rising healthcare costs. It makes only very brief mention of Social Security. It focuses primarily on Medicare, Medicaid, and health care costs in general.

    The following quote tells the truth about exactly why Medicare and Medicaid are problems.

    America has one of the most wasteful healthcare systems among advanced nations. Combined with the demographic realities of rapidly growing elderly population, America’s healthcare system leaves us with an unsustainable fiscal future.

 

From these articles we can conclude that Social Security is not a major contributing factor in rising deficits. Medicade apparently is a major contributing factor but it is not due to a flaw in Medicade itself. It is because the American healthcare system is broken!

The following articles discuss the reasons why the American healthcare system is so expensive.


  • 6 Reasons Healthcare Is So Expensive in the U.S.

    The following are two very important quotes from this article.

    In most countries the government negotiates drug prices with the drug makers, but when Congress created Medicare Part D, it specifically denied Medicare the right to use its power to negotiate drug prices. The Veteran’s Administration and Medicaid, which can negotiate drug prices, pay the lowest drug prices.

    Most other developed countries control costs, in part, by having the government play a stronger role in negotiating prices for healthcare. Their healthcare systems don’t require the high administrative costs that drive up pricing in the U.S. As the global overseers of their country’s systems, these governments have the ability to negotiate lower drug, medical equipment and hospital costs. They can influence the mix of treatments used and patients’ ability to go to specialists or seek more expensive treatments.


  • How Price Transparency Can Control the Cost of Health Care

The following is a meme this is often shared in response to discussions about Social Security being a major contributing factor in the deficit.

An often shared meme that makes the following claim. Next time a Republican tells you that ‘Social Security is broke,’ remind them that Pres. Bush ‘borrowed’ $1.37 trillion of Social Security surplus revenue to pay for his tax cuts for the rich and his war in Iraq and never paid it back.

The above meme makes the following claim. Next time a Republican tells you that ‘Social Security is broke,’ remind them that Pres. Bush ‘borrowed’ $1.37 trillion of Social Security surplus revenue to pay for his tax cuts for the rich and his war in Iraq and never paid it back.

The article Did George W. Bush ‘borrow’ from Social Security to fund the war in Iraq and tax cuts? ranks this claim as mostly false.

The following quotes are relevant.

For about 50 years, Social Security was a “pay-as-you-go” system, meaning annual payroll taxes pretty much covered that year’s benefits checks. Then in 1982, President Ronald Reagan enacted a payroll tax hike to prepare for the impending surge of retiring baby boomers, and a surplus began to build.

By law, the U.S. Treasury is required to take the surplus and, in exchange, issue interest-accruing bonds to the Social Security trust funds. The Treasury, meanwhile, uses the cash to fund government expenses, though it has to repay the bonds whenever the Social Security commissioner wants to redeem them.

Experts told us there’s no question that the Treasury will repay the Social Security surplus (including what was accumulated during the Bush years) when the trust fund starts redeeming the bonds in 2020.

Thus, this is not a contributing factor.

Final analysis

I rank the claim made by Mitch McConnell as liar, liar, pants vaporized.

While Medicare does contribute to the deficit, it is because of larger problems related to the cost of healthcare. Simply requiring greater healthcare price transparency and allowing the United States government greater control over the cost of drugs would deal with much of that.

As for Social Security, there are numerous less drastic options for addressing the long-range solvency problem that do not involve cutting benefits. Some of these options are as follows.

  • Increase the Payroll Tax Cap
  • Eliminate the Payroll Tax Cap
  • Reduce Benefits for Higher Earners
  • Increase the Payroll Tax Rate
  • Apply Payroll Tax to All Salary Reduction Plans

A more detailed discussion of suggested reforms to Social Security can be found in the following locations.

 

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