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Federal Deficit: it is mostly Entitlement spending

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March 13, 2013 – Comments (10)

Recently, a Fool Article stated “the key driver of our recent deficits: the bloated U.S. security apparatus ”. Beg to differ: it is mostly American generosity in giving away free food and free money and free medical care that threatens the federal budget and our economy.

The author did some slicing-and-dicing and shake-'n-bake of the federal budget to come to his conclusion. Well, I did the same thing and came up with an entirely different conclusion.

Gentlemen, start your engines...

I chose the years 2000 (because the federal gov't ran a surplus that year) and 2012 (the most recent fiscal year). I chose Medicare (free medical care for old people), Medicaid (free medical care for the “poor”), and Welfare (free food, free rent, free Obamaphones, etc.), and in toto these take up about 40% of the entire federal budget.

The Numbers...

I herewith cite “per capita” (per person) spending in the federal budget:

**Medicare increased $700 to $1,709.

**Medicaid increased $483 to $1,306.

**Welfare increased $629 to $1,445.

Inflation...

I am pretty sure that the above numbers are not corrected for the CPI. OK, let us do a calculation using % of GDP, whose calculation is not affected by inflation year-to-year.

**Medicare increased 2.0% to 3.6%.

**Medicaid increased 1.4% to 2.1%.

**Welfare increased 1.8% to 2.9%.

In Conclusion

In one sense, the author is correct: the DOD has its share of white elephants: V-22, F35, LCS. However, to blame these for the federal budget deficit in the face of the hard numbers is not logical. Using the tube of lipstick my GF hates, and this cocktail napkin (ewww...could you get a clean one from the bartender?), it seems that free stuff to the “old” and “needy” has increased from 5% of our economy to almost double.

Ladies and Gentleman of the jury, which is the real cause of the an annual federal deficit in excess of $1 trillion?

10 Comments – Post Your Own

#1) On March 13, 2013 at 9:25 PM, jerryguru69 (95.29) wrote:

BTW: 5% of GDP is $800 billion, more than 1/2 of the current budget deficit

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#2) On March 14, 2013 at 10:50 AM, Teacherman1 (28.03) wrote:

One correction, "Medicare (free medical care for old people)"

Only Part A is provided based on age, and does not cost (currently).

Parts B and D if provided, is done so at a cost to the person on Medicare (currently), and they paid at least something from earned wages.

Medicare does not pay 100 percent, but about 80% and most have to pay for supplementary insurance to cover that.

The total cost is, of course, less that an individual policy in the market, but is still a long way from free.

Just to clear up a misconception.

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#3) On March 14, 2013 at 8:56 PM, jerryguru69 (95.29) wrote:

True, Teacherman1, but still misleading.

Old folks on Medicare receive waaaay more in benefits than they pay: their premiums are are merely a token amount (though still debilitating if they are surviving SSI check to SSI check) that only covers a tiny % of the total amount of benefits that they will receive over a lifetime. That is why the Uncle Sugar has to subsidize them, to the point that the $$$ are double that of Medicaid, which is totally free. 

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#4) On March 15, 2013 at 9:42 AM, Teacherman1 (28.03) wrote:

"token amount"?

While I am not living SSI check to SSI check, I am on Medicare now, and my monthly premiums are 50% of what it would cost me for a full major medical policy in the open market.

While it is good that it is only 50%, that is a long way from token

That does not include my wife, who is covered by her employeer, but just for myself.

And I still have to make co-payments and pay deductibles.

I don't know how people who are living SSI to SSI are able to pay for that.

I am not arguing with you that it is a large chunk of the federal budget, but it is not a "gravy train", by any means.

That 50% is before you include what I paid in each year while working.

JMO and worth exactly what I am charging for it.

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#5) On March 15, 2013 at 2:00 PM, JaysRage (88.45) wrote:

Well, both are too much. 

"Entitlement spending" = 1.719 trillion (more than revenue of 1.4)

"Military spending" = .9 trillion (way too much)

But it's silly to say that entitlement spending is not a big part of the deficit when you could wipe military spending down to zero, and we'd still be 300 billion over budget.   

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#6) On March 15, 2013 at 8:34 PM, jerryguru69 (95.29) wrote:

"JMO and worth exactly what I am charging for it."

Au contraire, mon ami. If either one of us is wrong, our children and grandchildren will pay dearly for our mistakes. It is extremely important that we get this correct.

**surely you will admit that the $$$ of medical benefits that you will receive in your golden years is waaaay more than the $$$ that you will pay in premiums and co-pays and so forth, and that working people (some of whom are trying to raise families) will have to make up the difference in payroll taxes and medicare taxes and so forth.

**I will admit that for many seniors near the edge on limited means, the $$$ required can be a big problem. I read that Medicare A is free, B is like $125 a month and can be deducted from your SSI checks, and that Part D is like $60, plus other stuff...

Are you willing to admit that, as currently constituted, Medicare is insufficient for those who depend on it, and way to expensive for the working class who pay for it?

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#7) On March 16, 2013 at 11:27 AM, Teacherman1 (28.03) wrote:

jerryguru68

Of course it needs to be "fixed". I was never of the opinion that it could go on the way it is.

My point was that what was received was not "free".

You say B is $125 and D is $60.

What you are missing is that for those amounts, you have only 80% coverage, so you have to purchase additional insurance to help cover the 20% that is not covered. This brings the total up to between $250 and $300 per month if you do not want to receive a devastating medical bill.

As with all "social programs", it needs to be adjusted.

The Govt. (i.e.taxpayers) needs to provide for those who can not do for themselves, and reduce help for those who do not need it.

Social Security should be taken out of the "grab pot", and the Govt. should not be allowed to use it except for what it was intended to be used for. The program needs to be adjusted to make sure it is adequately funded, by adjusting the age at which individuals who collect it based on age and not other reasons, and percentages to be  paid out, perhaps made on a sliding scale based on other income and assets, to assure it is there for those who actually need it.

Not all medicare receipents have massive medical bills. For example, in the two years that I have been on it, my covered medical bills have been a small percentage of my current premiums, not even counting what I paid into the program before.

There will be some who will receive much more than they paid or are paying in, but it is not as "cut and dried" as many assume.

The fact that the premiums can be deducted from SSI, is not meaningful. That just means those who rely on SSI for basic living expenses, collect less SSI.

For the record, I am a fiscal conservative and a social liberal. I am in favor of prudent, wise use of availabe funds to provide for those who need the programs, but I believe that those who need the help, should receive it.

Don't forget, that those who receive it now, were also "working people" who also paid for those ahead of them in the cycle.

There are a lot of changes that need to be made in all Govt. programs, and this country is rich enough to do what is "right". We just need to use our resources more wisely.

We waste enough through careless, over priced administration to both cut costs and provide what is needed by those who need it.

Is it a burden on those who are paying into the system. Yes. Is it a "free ride" for those who did and are still paying into the system. No.

By the way, many of those who receive SSI pay federal taxes on it.

I don't think we are as far apart as it might seem, we are just focusing on and emphasising different aspects.

Have a good week ahead, and figure out some way to get our Govt. to do their job without all of the "bickering", and to do it now.

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#8) On March 17, 2013 at 3:03 PM, jerryguru69 (95.29) wrote:

 

 

I note, very carefully, that you subtly admit that, as a senior citizen, you will receive waaaaay more $$$ in benefits than you will ever put in. This is the problem: you (and myself in a years that can be counted on two hands) are stealing from our children, or does that not bother you?

I repeat: the benefits that you receive from Medicare are free. Consider: you go to a Toyota dealership with a gov't ID card and half dozen Ben Franklins. In return, you get a Prius. OK, technically, your new car is not “free” (“only” 80% coverage? What, you want 100% coverage, all for “free”?), but is this not simple “word play”? Likewise, is not Medicare that you receive “free”?

Us old farts have not pre-paid for the discounted world-class medical care that we will receive. It is only by the grace of Congress that we receive same.

BTW: the only way you will pay taxes on SSI is if you are making $50,000 or more per year. In this case, what the hell makes you think you are entitled to SSI or Medicare?

BTW2: for only $120 + $60 = 80% coverage sounds like a bargain to me...

 

 

 

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#9) On March 18, 2013 at 8:50 AM, Teacherman1 (28.03) wrote:

Since you seem to read whatever you want into my replys, I see no sense in continuing this "discussion".

You have made up your mind that you are 100% right, and "logic" is not going to get in your way, so I see no reason to continue making any more replys to your posts.

If you want to consider it "free", go ahead and be my guest. 

Now get the last word and feel good about yourself.

Have a good day.

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#10) On March 20, 2013 at 3:16 PM, ValueInvestor747 (82.26) wrote:

I think you both (Teacherman and Jerryguru) are making good points. I think the takeaway should be the brunt of the blame should be placed on the federal government's shoulders. When SS was created, we were all told this would be a "lock box" program where you pay into the system, your money is set aside in a separate trust, and you get it when you retire. Well, we all know that the government raided that "lock box" for pet projects and wasteful spending. Similar idea with Medicare, and Medicaid is simply a terrible, unsustainable model.

The elderly are too big of a voting bloc for this to happen any time soon, but the Medicare age needs to rise. Just adjusting it by 2 years gradually will save $150B over 10 years (per the Committe for a Responsible Fed Budget). Benefit changes need to occur because the current plan simply punishes providers who take Medicare patients, which will absolutley result in rationing of care and a cost shift to private plans (and thus consumers). 

Lastly, I've seen some false numbers on the comments. The 2011 budget numbers (per CBO) are as follows:

-Medicaid: $275B + Medicare: $560B + SS: $725B = $1.56T

-Defense: $700B

- Other Mandatory: $465B

- Non-Defense Discretionary: $646B

- Interest: $227B

TOTAL: $3.598T (keep in mind revenues were $2.3T). How about start with that "Other Mandatory" and "Non-Defense Discretionary?" That's over $1T alone and is made up of pet projects and things like Wellfare, unemployment, obamaphones, etc. 

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