The United States has a major looming budget problem. When you look at the Federal Budget there are really two different sections. There is "mandatory" spending and there is "discretionary" spending.
Mandatory spending (which does not include debt service) is a few line items that consume the lion's share of the budget. These include Social Security, Medicare, Medicaid, Veteran's retirement and a few other smaller programs - however the bulk of this spending is on Social Security, Medicare, and Medicaid. Those three account for just under $30 trillion of the $34 trillion that we are going to spend on these mandatory programs between FY 2018 and FY 2017.
Discretionary spending is basically everything else. It includes the Department of Defense, Education spending, foreign aid, science, etc etc etc....
To put into perspective how these programs are consuming the Federal budget, and ultimately going to crowd out almost the entirety of discretionary spending it is important to look at the trend: (Data is from the OMB and the CBO)
1966: 67% of the federal budget was discretionary spending
1986: 44% of the federal budget was discretionary spending
2006: 38% of the federal budget was discretionary spending
2016: 31% of the federal budget was discretionary spending
In fact, according to the CBO, by 2040, mandatory spending will consume 81% of the federal budget. Bear in mind that this mandatory spending does not include debt service. It is important to note here that the assumptions that the CBO made to even arrive at this conclusion. For example, they estimate that revenue will rise to 18.4% of GDP by 2027 - which is important to note as this is a full percentage point above the 50 year historical average of 17.4%.
Going by the CBO baseline, in 2027, net interest payments on our debt will actually cost more per year (roughly $800 billion) than the Department of Defense and more than Medicaid. This is all on top of the over $5 trillion that we are going to spend in the next decade to service our debt. Bear in mind as well that the CBO has also already estimated that over the next decade, policies already in place are going to add an additional $10 trillion in debt held by the public - meaning by 2027, if nothing changes, we are looking at an over $30 trillion national debt - and meaning from a political point of view for Republicans upset that "President Obama added $9 trillion to the debt", we are on track to add at least $10 trillion over a decade before we have done anything. And of course this doesn't fully account for rising interest rates.
The data above makes one thing clear - we have a looming problem in Washington. If we take no action (spending cuts, tax hikes etc) it is basically a certainty that we will be looking at a federal government that literally has no money to spend on anything outside mandatory spending on entitlements and servicing debt.
I know that programs like social security, medicare, and medicaid are a "third rail" and unfortunately seemingly off limits for reform, but when addressing spending issues of this magnitude does it not make sense to address what consumes 2/3rds (and growing) of your current budget?
Mandatory spending (which does not include debt service) is a few line items that consume the lion's share of the budget. These include Social Security, Medicare, Medicaid, Veteran's retirement and a few other smaller programs - however the bulk of this spending is on Social Security, Medicare, and Medicaid. Those three account for just under $30 trillion of the $34 trillion that we are going to spend on these mandatory programs between FY 2018 and FY 2017.
Discretionary spending is basically everything else. It includes the Department of Defense, Education spending, foreign aid, science, etc etc etc....
To put into perspective how these programs are consuming the Federal budget, and ultimately going to crowd out almost the entirety of discretionary spending it is important to look at the trend: (Data is from the OMB and the CBO)
1966: 67% of the federal budget was discretionary spending
1986: 44% of the federal budget was discretionary spending
2006: 38% of the federal budget was discretionary spending
2016: 31% of the federal budget was discretionary spending
In fact, according to the CBO, by 2040, mandatory spending will consume 81% of the federal budget. Bear in mind that this mandatory spending does not include debt service. It is important to note here that the assumptions that the CBO made to even arrive at this conclusion. For example, they estimate that revenue will rise to 18.4% of GDP by 2027 - which is important to note as this is a full percentage point above the 50 year historical average of 17.4%.
Going by the CBO baseline, in 2027, net interest payments on our debt will actually cost more per year (roughly $800 billion) than the Department of Defense and more than Medicaid. This is all on top of the over $5 trillion that we are going to spend in the next decade to service our debt. Bear in mind as well that the CBO has also already estimated that over the next decade, policies already in place are going to add an additional $10 trillion in debt held by the public - meaning by 2027, if nothing changes, we are looking at an over $30 trillion national debt - and meaning from a political point of view for Republicans upset that "President Obama added $9 trillion to the debt", we are on track to add at least $10 trillion over a decade before we have done anything. And of course this doesn't fully account for rising interest rates.
The data above makes one thing clear - we have a looming problem in Washington. If we take no action (spending cuts, tax hikes etc) it is basically a certainty that we will be looking at a federal government that literally has no money to spend on anything outside mandatory spending on entitlements and servicing debt.
I know that programs like social security, medicare, and medicaid are a "third rail" and unfortunately seemingly off limits for reform, but when addressing spending issues of this magnitude does it not make sense to address what consumes 2/3rds (and growing) of your current budget?