Autopilot spending is the real debt-ceiling culprit
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It’s that time of year again. In the few legislative days of September, Congress will resume squabbling over budgetary matters. There must be a shared agreement between Congress and the president by Sep. 29 in order to raise the debt ceiling and avoid the calamities of a government shutdown.

The president will no doubt be making the chaos of September squabbles even more complex with his insistence on a funding measure for his proposed border wall. Speaking at a rally in Phoenix last week, the president threatened: “If we have to close down the government, we’re building the wall.”

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If there is a government shutdown this fall, it would be the second such occurrence in four years. A government shutdown in 2013 sent almost 2 million federal employees home or on notice for 16 days and caused serious turmoil in the markets. A replay of the events of 2013 should lead us to question whether such fiscal scenarios are becoming more common, and if so, what are the underlying causes.

 

Aside from the political bargaining that has always surrounded the budgetary process, there is an increasingly problematic and blindingly obvious issue at hand —the endless growth in mandatory spending as a share of the federal budget.

No new congressman or congresswoman goes to Washington without the shameless dreams of policy change in their heads. That expectation, however, is increasingly challenged by the growing realization that more and more of the annual federal budget is being devoted to mandatory programs, as the share of the budget subject to annual appropriations continues to shrink.

While mandatory programs can be changed (and sometimes fundamentally altered), the usual practice is to leave the programs alone and fund changes in beneficiaries.

Medicare is a mandatory program that has been changed from time to time, but never fundamentally altered. This is no annual policy legislation dealing with Medicare; and, it is not a part of the annual spending debate. In other words, the policy discussion about senior healthcare practically ended with the adoption of Medicare in 1965. Since then, the “policy debate” has been about changes in beneficiaries and funding this mandatory program.

A large and growing share of the federal budget replicates this Medicare system of autopilot financing, with 69 percent of total federal spending going toward funding mandatory programs and outlays. This growth in mandatory spending occurs only as giveaways for which no budgetary balance is sought.

When mandatory programs such as Medicare and Social Security programs were signed into law, there were several workers to every beneficiary. In other words, in the early stages of the Social Security program, many paid in and few received benefits. In 1945, there were 41 workers to every beneficiary. Today this ratio is less than three workers to every beneficiary and expected to drop to two workers per retiree by 2030.

Pay-as-you-go schemes can work only as long as enough people are paying into the system. Yet, with the leading edge of the enormous baby-boom generation now reaching retirement, these programs are becoming deepening seas of red ink.

As mandatory spending continues to crowd out discretionary spending, policymaking is becoming an increasingly futile function in the budgetary process. The discretion left to our current voters and policymakers to determine how government should evolve is in serious decline.

On current projections, the share of federal spending on autopilot is expected to be in excess of 77 percent within a decade. Put another way, by 2027 our elected representatives will have discretion over less than a quarter of our tax dollars.

Rather than observing the debate over the debt ceiling as one of political bargaining, we should be seeking solutions to the underlying issue of declining discretion in the budgetary process.

Jack Salmon is a Washington, D.C.-based researcher focused on federal fiscal policy. Salmon holds an M.A. in political economy with specializations in macroeconomics and comparative economic analysis from King's College London. 


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