Short-term cuts are not a long term strategy


When it comes to cutting federal spending, many politicians focus on cutting from the Department of Defense. Others focus on various federal programs for the poor or subsidies for corporations. This spending could add up to serious dollars, though it would not be enough to balance the budget.

Even the most serious efforts to reform the non-entitlements/non-mandatory part of the federal budget won’t make much of a dent in the long run. Known as “non-discretionary spending,” mandatory spending takes up over 50% of federal spending and, as Veronique de Rugy pointed out last week, it’s going to keep growing (emphasis added):

In fact, if we don’t reform entitlement spending growth we will need to raise it [the debt ceiling] again many times. There is no other option. Without changes, spending as a share of GDP is projected to almost double over the next 30 years (from 23 percent today to 40 percent in 2045). The gap between revenue and spending will grow considerably, causing the public debt to grow from 70 percent of GDP today to about 250 percent by 2045. So in a sense this fight over raising the debt ceiling is merely symbolic if Republicans’ greatest demand is nickel-and-dime discretionary spending cuts. Don’t get me wrong, I am all in favor of fighting for any spending cuts. But the real fight is about addressing our long-term problems, which will require significant reform to the drivers of both our spending and debt: Medicare, Social Security, Medicaid, and the new health-care entitlement.

From a purely budgetary perspective it would be easy to make the necessary changes – to cut Social Security and Medicare drastically at any time, which alone total a third of the federal budget. Politically, most politicians won’t risk their careers by aggressively reforming those programs. It’s also morally questionable, since senior citizens have been forcibly “investing” their money in those programs for retirement. However, we need substantial reforms to those programs, and soon, which means all Americans will see some pain, though less than is expected if reforms are postponed. Additionally, some reforms, such as better oversight of Medicare’s payment system, would save billions without cutting any services for seniors.

When it comes down to not raising the debt ceiling, or implementing substantial short-term spending cuts, de Rugy is right that the political focus is too often on the overspending Congress annually approves through various committees. While that is a problem, the larger problem is in Obamacare, Social Security, Medicare and Medicaid. Without solving them, we can make all the cuts in the world to the Departments of Education, Defense, Agriculture, and almost any other non-mandatory part of the budget…all without preventing a fiscal collapse of America.