Entitlements aren't the problem — Congress is

Lance Bloch /

Published Mar 19, 2013 at 05:00AM

I read a fine column by William McKenzie of the Dallas Morning News in The Bulletin on Feb. 24.

He compared three approaches that have been used in discussions of our sluggish American economy. The first view, and the one that the author held, is that the federal debt is our biggest worry. The second view is that the economy needs more stimulus. The third view contends that economic inequality should be considered to be our largest concern.

For three quarters of the editorial he presented some of the arguments for each position, and concluded that “ ... the debt remains a big challenge,” and that as it continues to grow, “a day of reckoning is coming.”

It was well-written, balanced and not overstated. Then he made a huge leap from reason to ideology, one that I have heard again and again in the endless ideological debates between federal politicians. He stated, “The growth in entitlement programs like Medicare, Social Security and Medicaid is our real problem.”

I know many of you are now saying “yes, he’s right”. Many of you, like McKenzie, seem to equate federal entitlement programs with federal debt. That is incorrect and very misleading. Debt is defined on an annual basis as the excess of expenditures over income. Cumulative federal debt is the addition of these excesses of expenditures over income over the life of the debt, and the life of the country. Currently, our cumulative federal debt amounts to 73 percent of Gross Domestic Product, or one year of America’s GDP. Many economists have suggested that 90 percent may be the tipping point for the debt to become too great a burden on economic growth.

But are entitlements the problem? Let’s look at Social Security first. The Social Security Trust Fund has been integrated in the reporting of the federal budget since Lyndon Johnson’s “Unified Budget” of 1968. That means that if Social Security has a surplus, which it does, that directly reduces the current national debt. In 2011, the U.S. GDP was a bit over 15 trillion dollars. The Social Security Trust Fund currently holds 2.6 trillion dollars. We don’t actually have most of that money. But your FICA payments contributed all of it to the trust fund and the federal government has spent it elsewhere. Without that surplus from the Social Security Trust Fund, the U.S. debt-to-GDP ratio would be very close to 100 percent today.

Another way to put it is, if there were suddenly no FICA taxes on our payroll, no payments made to Social Security benefits and no Social Security program or Trust Fund, our debt-to-GDP ratio would be close to 100 percent today. That is worse than Italy or Greece.

Medicare and Medicaid certainly have different funding concerns than Social Security, but are they the central components of our debt problem? Their problems arise from medical costs increasing at many times the rate of inflation.

But where is the debt problem? Maybe we should consider that U.S. defense spending soared from $287 billion in 2001 to more than $700 billion in 2010 and 2011. The U.S. currently spends $250 billion more on the military each year than it does on Medicare, according to Bloomberg.com.

Included in this military budget are many projects that the Pentagon itself says are unnecessary. They are in the budget because Congress wants them in the budget.

So, in the final analysis, does the debt problem arise from Social Security, Medicare, Medicaid, defense spending, or simply Congress?

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