A backward-looking nation

Priorities are skewed when about 40% of federal budget benefits seniors

November 29, 2010|By Thomas F. Schaller

If federal spending reveals a nation's priorities, America is a country far less invested in its future than it is fixated upon and indebted to its past. Let me prove it.

Using the federal government's estimates, the U.S. government in fiscal year 2010 will spend $287 billion for what the government classifies as "physical resources," including energy, environment, housing, transportation, and commerce; $200 billion for other basic functions like international aid, science and technology, agriculture and the courts; another $135 billion for education spending; and $548 billion in income security for the poor and unemployed. The total for these programs is $1.17 trillion.

Now, let's conduct a generational accounting of the budget.

Not all of the $702 billion spent on the Old Age Survivors and Disability Insurance program — Social Security, for short — goes to seniors: About 21 percent of OADSI is spent on disabled Americans who cannot work. Likewise, an estimated 16 percent of recipients of Medicare's $458 billion are under-65 disabled persons. And although not specifically designated as a program for the aged, a mere 28 percent of recipients of Medicaid's $290 billion are nonseniors.

At roughly 79 percent of Social Security, 84 percent of Medicare, and 72 percent of Medicaid, estimated spending on seniors for these three programs will be $1.16 trillion — almost exactly the same amount spent on all categories listed in the second paragraph above, many of which also benefit seniors directly or indirectly. This $1.16 trillion doesn't include federal transfers for housing subsidies, veterans benefits, coverage for mental illness, or other programs from which seniors also receive cash or in-kind support.

Next, there are the shared obligations: National defense is what economists call a public good, meaning we all get it and none of us can refuse its protections if we tried; and every American owns her portion of the national debt. Because Americans 65-plus are 13 percent of the population, it's fair to include $92.7 billion of $712.9 billion in defense spending and $17.7 billion of the $135.7 billion in interest on the fiscal year 2010 national debt. That's another $100 billion.

Add it all up, and spending benefiting seniors constitutes at least a third and probably closer to 40 percent of the federal budget, while programs like child nutrition and milk supports ($17 billion) and the state children's health insurance subsidy ($10 billion) starve. A society that spends almost two-fifths of its resources on the one-seventh of the population that by definition will play the smallest role in that society's future is a myopic nation asking to be left behind by countries better invested in their futures.

But what about those other nations? In generational terms, how does America's spending compare with its fellow industrialized democracies?

In her book, "Age in the Welfare State," Princeton University's Julia Lynch demonstrates that of 20 advanced countries in the Organization of Economic Cooperation and Development (OECD), only Japan's ratio of spending on elderly relative to non-elderly citizens is wider than America's. According to a November 2009 report by Brookings Institution fellow Julia Isaacs, the ratio of public monies America spends on seniors relative to children is 2.4 to 1 — and 7 to 1 when considering only federal dollars.

Am I suggesting we put grandma and grandpa on an ice floe? No. But we must recognize that the United States is a nation more invested in its past than its future. This is as true of long-ago-negotiated union and state pension programs as it is the federal budget.

Yet, given the results of the 2010 midterms (the "revenge of the retirees," as I called it in my previous column), these disparities are likely to persist and probably worsen. Although spending for Social Security, Medicare and Medicaid grew from 2.4 percent of gross domestic product in 1960 to 9 percent by 2008, and may expand to 18 percent by 2050, in 2010 the supposedly small-government Republicans invoked the specter of Social Security and Medicare cuts to attract the votes of the older, whiter Americans who now comprise their base.

Few in either party have the courage to do anything because, as Ms. Isaacs writes, "fears of changes to entitlement programs will be viewed unfavorably by the electorate." Indeed, members of Congress — who, on average, are about 20 years older than the nation as a whole — dare not speak such truths because, as television satirist Stephen Colbert joked recently on his show, "Social Security and Medicare are called the third rails of American politics, because if you touch them, old people will shove you in front of an F Train."

With the powerful AARP in the conductor's seat, the terrifying rumble of that metaphorical train is felt particularly sharply every other November.

Thomas F. Schaller teaches political science at UMBC. His column appears regularly. His e-mail is schaller67@gmail.com.

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