If Something Can't Go On Forever, It Won't
From "A Short History of the Entitlement State," an editorial in today's Wall Street Journal:
FDR began the entitlement era with the New Deal and Social Security, but for decades it remained relatively limited. Spending fell dramatically after the end of World War II and the U.S. debt burden fell rapidly from 100% of GDP. That changed in the mid-1960s with LBJ's Great Society and the dawn of the health-care state. Medicare and Medicaid were launched in 1965 with fairy tale estimates of future costs.
Medicare, the program for the elderly, was supposed to cost $12 billion by 1990 but instead spent $110 billion....In inflation-adjusted dollars, Medicaid cost $4 billion in 1966, $41 billion in 1986 and $243 billion last year. Rather than bending the cost curve down, the government as third-party payer led to a medical price spiral....
According to the most recent government data, today some 50.5 million Americans are on Medicaid, 46.5 million are on Medicare, 52 million on Social Security, five million on SSI, 7.5 million on unemployment insurance, and 44.6 million on food stamps and other nutrition programs. Some 24 million get the earned-income tax credit, a cash income supplement.
By 2010 such payments to individuals were 66% of the federal budget, up from 28% in 1965. (See the second chart.) We now spend $2.1 trillion a year on these redistribution programs, and the 75 million baby boomers are only starting to retire.
In re which, a couple of observations:
The first is that I always used to wince whenever Ronald Reagan would praise FDR, whom he always admired. But Reagan's instinct--that, whereas the country could live with the New Deal, including Social Security, the Great Society was genuinely dangerous--seems to have been entirely correct. Score another one for the Gipper.
The second? That the only really surprising aspect of the downgrade controversy is why Moody's and Standard & Poor's haven't downgraded the federal government already.
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Comments:
Apr '11
Re: If Something Can't Go On Forever, It Won't
This WSJ editorial is exactly why I don't even argue with liberal family members, co-workers and aquaintences any longer. They just don't see the inevitibility of the situation and never will. The only thing they will even begin to budge on cutting back is defense spending, which if eliminated 100%, would still not make a dent in the problem. They insist on higher taxes that, even if doubled, would not produce any real solutions to the structural entitlement shortfalls coming down the road.
if something can't go on forever, it won't! INDEED!!
Sep '10
Re: If Something Can't Go On Forever, It Won't
If the rating agencies had any shame they would close up shop and join the merchant marine. On the other hand the US Treasury bond is the world's proxy for a risk free asset on which all other assets are priced. Everyone knows it isn't perfectly risk free but for the rating agencies to insinuate now that treasury bonds should be priced higher...than what? They don't say. It is politics or an effort to play along with the received opinion. According one astute observer http://scottgrannis.blogspot.com/2011/07/nobody-is-proposing-actual-spending.html we could balance the budget in 7 years by speding 2% more instead of 4% more...that is not stuff bad credit is made of, on the other hand good credit is made of tough choices that, one hopes, will be made in 2012 if not now.
Jul '11
Re: If Something Can't Go On Forever, It Won't
The only questions are when and how.
From a personal standpoint I am curious how bad Medicare and Medicaid will get before only foreign medical graduates are willing to accept those programs. Medicaid patients are the least grateful and the likeliest to sue. Getting underpaid makes avoiding this program an easy choice. There is no way, I mean no way, that Medicare can absorb the cost of the boomers. Many of the boomers have the unique combination of feeling entitled and expecting to live to 100 through technology. It all feels real expensive and non-sustainable.
Dec '10
Re: If Something Can't Go On Forever, It Won't
Sounds to me like we're headed to the next dark ages when it all comes tumbling down. Stupid me, I've drunk enough of the koolaid that I don't have a basement full of dried food and ammunition.
Jun '10
Re: If Something Can't Go On Forever, It Won't
One of the most contagious human diseases is selfishness. For too many Americans, medicare and social security (or any successor programs) just have to last as long as they do. After that, who cares? They don't. Sadly, we get the government we deserve.
Edited on July 28, 2011 at 6:18pmMar '11
Re: If Something Can't Go On Forever, It Won't
If a Republican candidate today praised FDR the way Reagan did, would they be labelled a RINO?
Apr '11
Re: If Something Can't Go On Forever, It Won't
I think they would be called worse then RINO. There are many things to appreciate about FDR and even LBJ. What people need to understand is not that FDR and LBJ had some evil scheme in mind they had some ideas that they thought could fix some real problems. Over time their ideas have done good but have also developed into unsustainable financial schemes. I don't think that was their intentions at the time, and I like to think they would be able to recognize this fact now if they were alive. The question for us is how do we salvage what is best about the programs in a manner that is sustainable.
Sep '10
Re: If Something Can't Go On Forever, It Won't
I think there intention was to appear to be doing good and thus get votes but I also don't think they had any genuine understanding of the nature of the unsustainable course they were embarking on, in part, because they had a lot of well-credentialed advisors telliing them it was ok.
Jul '10
Re: If Something Can't Go On Forever, It Won't
Government at all levels now confiscates 44.4% of GDP. We've come to the point where the top 20 percent of earners now support or subsidize the bottom 50 percent, while the 30 percent in between struggle just to keep their heads above water with their meager after-tax incomes.
We don't need half-hearted reforms. We need to dismantle the welfare state, root and branch.
The problem is that our venal political leadership flourishes from perpetuation of the status quo. So long as they can live in a cocoon of status and privilege, they're never gonna alienate the parasite class, who'll always vote for those who promise to sustain their undeserved "benefits".