Published March 07, 2013
Parks are closing. Government workers are being furloughed. The Department of Defense is issuing warnings about compromised military readiness. The Department of Homeland Security is making similar claims about border security.
Everywhere you look there is talk about the consequences of the recently imposed automatic federal spending cuts. Although most of these are really cuts in the Washington sense of the word—a slower rate of spending increase—sequestration is designed to make deficit reduction choices on auto pilot when federal lawmakers are unable to make them in real life.
The effected programs are being squeezed because mandatory spending on entitlements was largely taken off the table. This resulted in bigger cuts in everything from military spending to transportation infrastructure investments to national parks. But the sad fact is that this is the fiscal path the country was already embarking upon, with sequestration being just one small part of the problem.
That’s because as the Baby Boomers retire, entitlement spending and interest payments will gobble up the entire federal budget, leaving little room for anything else.
Ten years from now, automatically growing programs like Social Security and Medicare will make up 62 percent of annual spending. The Pentagon budget will be just 12 percent. We’re just seven years away from interest payments on the national debt outpacing defense.
According to an estimate by the nonpartisan Congressional Budget Office, interest payments and entitlements will consume the entire federal budget by 2025. That means no funds left over for the programs hit by sequestration without substantial additional borrowing.
Conservatives will rightfully be concerned about putting defense on a starvation diet. But many liberal priorities will be hurt too.
The group Third Way published a paper titled “Collision Course: Why Democrats Must Back Entitlement Reform,” arguing, “as the cost of entitlement programs like Medicare and Social Security has skyrocketed, we’ve spent less and less of our budget educating kids, building roads, and curing disease.
"That means no money for national defense. No money for homeland security. No money to fix the nation’s crumbling bridges and roads. No money for medical research to find a cure for cancer or Alzheimer’s or Parkinson’s diseases," Rep. Frank Wolf (R-Va.) concurred in a March 2012 House floor speech.
The nonpartisan fact-checkers at PolitiFact Virginia rated Wolf’s statement as “true.”
While optimists hope that faster economic growth or reduced health care costs could improve this bleak budget outlook, there is also the potential for things to get worse.
If interest rates rise significantly above their current lows, so will the cost of borrowing. The U.S. government could also face further credit downgrades, such as when Standard & Poor’s stripped Uncle Sam of his AAA bond rating in 2011.
Social Security and Medicare are currently projected to face their own cash crunches soon enough. That means that even as they consume more federal tax revenues, these programs may see a decline in quality as the government struggles to pay for the promises it has made to the nation’s seniors.
By one estimate, nearly one-third of doctors nationwide refuse to accept new Medicaid patients because the government health care program for the poor doesn’t pay enough to cover the costs of treating them. This hasn’t just hurt doctors, who received from Medicaid just 58 percent of what private insurance paid in 2008, but also people covered under the program, as their health care options have dwindled.
If Medicare has to cut its payments to doctors as well, there may be a similar decline in quality health care for senior citizens too. “If caring for Medicare patients is too costly, doctors will simply opt out and care for the disabled and those over 65 will become hard to find,” writes the physician Peter Lipson.”
At a time when the country is changing, spending commitments that were made in a very different bygone era are actually handcuffing politicians and limiting the next generation’s choices.
Reforming entitlements before it’s too late—and before current beneficiaries would be impacted—would keep Americans from living in a permanent state of sequestration.
Sometimes, less is more.