An Entitlements Primer

Today's word is "entitlements."  What exactly are we talking about when we throw this word around?  It is in the national interest for all of us to have an understanding of our federal government's entitlements program, so let's take a look.  Join me, won't you?

Entitlements are "the kind of government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right (enforceable in court, if necessary) whenever they meet eligibility conditions that are specified by the standing law that authorizes the program. (emphasis mine) The beneficiaries of entitlement programs are normally individual citizens or residents, but sometimes organizations such as business corporations, local governments, or even political parties may have similar special "entitlements" under certain programs. The most important examples of entitlement programs at the federal level in the United States would include Social Security, Medicare, and Medicaid, most Veterans' Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs."

– Paul M. Johnson, "A Glossary of Political Economy Terms"

The underlined section is meaningful because it illustrates the difficult job the government has in controlling spending or even in making budgetary forecasts. Entitlement programs are open to all who meet the eligibility criteria but since there is no way to know in advance how many people that will be in any given year, it is impossible to forecast precisely how much money will be needed. As open-ended programs, they also are exempted from the annual appropriations review to which all non-entitlement expenditures are subjected.

According to Johnson, a professor of Political History at Auburn University, "since the middle 1980s, entitlement programs have accounted for more than half of all federal spending. Taken together with such other almost uncontrollable (in the short run, that is) expenses as interest payments on the national debt and the payment obligations arising from long-term contracts already entered into by the government in past years, entitlement programs leave Congress with no more than about 25% of the annual budget to be scrutinized for possible cutbacks through the regular appropriations process. This very substantially reduces the practicality of trying to counteract the ups and downs of the overall economy through a "discretionary" fiscal policy because so very little of the budget is available for meaningful alteration by the Appropriations and Budget committees on short notice."

When the pie on the right is bigger than the pie on the left, that's a problem.

For 2011, Congress approved a Federal budget of slightly more that $3.8 trillion dollars.  About 65% of this year's budget will be spent funding entitlement programs and paying interest on our national debt. Social Security is the largest of the entitlement programs but there is debate as to whether it actually is an entitlement.  Workers pay into Social Security over the course of their careers, entrusting the government with a portion of their retirement savings.  Since the government merely holds those funds for our eventual benefit, many believe that the program should be stricken from the list of entitlement programs.   Medicare and Medicaid are the other two biggest entitlement programs. Together, these three programs currently account for more than 70% of all entitlement spending.  As the Boomer generation ages, these three programs' costs to the federal government will continue to rise.  

 Knowing this, one quickly sees the trouble Congress has in addressing the issue of ever-increasing entitlement spending.  The Social Security program was enacted in 1940 and the two health care programs have existed only since the 1960s but over time all three have become  the sacred cows of public policy. Any politician will tell you that endorsing the idea of cuts to the two health care programs or changes to Social Security is the surest way to get voted out of office. Yet changes to these three programs is exactly what has to happen in order for our country to have a chance at budgetary balance and deficit reduction.  Everyone has an opinion on the efficacy of the government's other social programs (Head Start, School Lunch, Welfare, Food Stamps, Pell Grants, Veterans Programs, etc.) but these programs are comparatively small.

Florida and Missouri recently enacted mandatory drug testing for all welfare recipients.  Florida Governor Rick Scott defended this action, stating that "It's not right for taxpayer money to be paying for somebody's drug addiction. On top of that, this is going to increase personal responsibility, personal accountability. We shouldn't be subsidizing people's addiction."  While I agree with this and find it hard to believe that this hasn't been law until just recently, I understand that the cost savings effected by kicking drug users out of the welfare program will provide only minor budgetary relief.    

Giving such people handouts is emblematic of our government's failure to be accountable for the money it spends, but drug use by welfare recipients is not the big problem.  President Obama's health care reform offers up some cost savings in the two plans, but opponents are dubious that such savings will ever be realized.  Americans–all Americans–have to face the fact that the sacred cows of entitlement spending are going to have to be sacrificed on the altar of budgetary reform in order for our country to regain and maintain its financial footing.  Kicking the dope smokers out of the welfare program is not enough.