A Federal Budget on Auto-Pilot

President Obama’s proposed federal budget for 2016 envisions never-ending growth of federal spending.

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This is a significant change from the past six years in which federal government spending has held fairly steady. Following a big jump in 2009 due to the bailouts and financial crisis, government spending never returned to pre-crisis levels, but it didn’t grow either. In 2009, the federal government spent $3.518 trillion, and that number was nearly identical at $3.506 trillion in 2014.

But things are different now. The president’s budget envisions a $253 billion spending increase in 2015 and another $240 billion hike next year. In fact, federal spending is poised to grow more than $200 billion annually every single year for the next decade.

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Most Americans, however, would probably be surprised to learn that these hikes have little to do with the president’s expensive new dreams or the recklessness of Congress.

In fact, just about all the spending increases comes from a handful of established programs: a $53 billion increase in Medicare, $47 billion more spending for Social Security, a $37 billion hike for National Defense and $18 billion more for Medicaid.

Oh, and then there’s interest on the federal debt. That’s projected to go up $54 billion next year.

Add it all up and that accounts for $209 billion of the $240 billion in spending hikes for 2016.

Some might say this is unfair to bring up because President Obama has no control over these items. Actually, that’s the point. Nothing the president or Congress does in the short-term has much of an impact on the budget. The decisions that drive the budget were made by other presidents and Congresses long ago. Most of the key decisions were made while Lyndon Johnson and Richard Nixon were president nearly 50 years ago.

The end result of those long-ago decisions is that two-thirds of all spending is consumed by just three items — Social Security, Medicare/Medicaid, and National Defense. When you add interest on the debt, you’ve accounted for 72 percent of all spending. Not coincidentally, those are the very programs that are pushing up spending in 2016. And, of course, there are other automatic spending programs on top of that — things like unemployment insurance and pensions for government workers.

That leaves only a small sliver of the budget for the president or Congress to control in the short-term.

This reality has important implications for anyone who wants the nation to regain control of federal spending. The only way to reduce spending in the long run is to go where the money is and implement thoughtful long-term reforms that will reduce the cost of Social Security, Medicare/Medicaid, and National Defense.

This not an opinion or a preference; it’s a mathematical reality. If anybody tells you that they can reduce spending without touching any of these programs, they’re either lying to you or fooling themselves.

What this means is that political leaders who sincerely want to reduce the size of the federal government should not focus on the year-to-year budgets. Instead, they should develop long-term reforms that reduce the burden of Social Security, Medicare/Medicaid and National Defense.

Nothing else will accomplish the goal.

Also see,

Federal Budget Deceit

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