“A funny thing happened on the way to entitlement explosion,” senior White House adviser John Podesta tweeted last week, appending a chart that showed the federal deficit shrinking and the rate of health cost growth slowing.
Podesta was highlighting President Obama’s speech at Northwestern University on Thursday in which he declared fiscal victory and an end to the “mindless austerity” and “manufactured crises” of Washington budget debates.
In other words, when it comes to entitlement reform, as far as this administration is concerned: mission accomplished.
Which is fair enough, if your horizon is Jan. 20, 2017.
Anyone looking beyond that date should be alarmed at the satisfaction Obama proclaims despite the prospect of ever-rising government debt. What’s most astounding about his flip-flop on entitlement reform is that the biggest victim will be the progressive causes he claims to cherish.
Having risen with astounding speed from 2007 to 2009, the deficit indeed has fallen dramatically. The decline is mostly an expected consequence of economic recovery — tax collections go up, unemployment benefits go down — but Obama’s tax hike is a big contributor as well.
It is also true that health costs are not rising as quickly as had been projected, which is helpful for Medicare finances. Hard economic times may have caused people to visit the doctor less often, but most experts agree that cost-bending measures in Obama’s Affordable Care Act played and will continue to play a role.
That’s the good news.
Now look into the future as seen by the scrupulously nonpartisan Congressional Budget Office.
Federal debt has reached 74 percent of the economy’s annual output (GDP), “a higher percentage than at any point in U.S. history except a brief period around World War II,” the CBO says, “and almost twice the percentage at the end of 2008.” With no change in policy, that percentage will hold steady or decline a bit for a couple of years and then start rising again, to a dangerous 78 percent by 2024 and an insupportable 106 percent by 2039.
As a result, by 2039 the government will be shelling out interest payments equal to 4.5 percent of GDP, more than twice the average share of the past 40 years.
Meanwhile, with the population aging and costs still rising, payments for Social Security and health programs including Medicare and Obamacare also will soar, the CBO estimates. By 2039 those programs will consume 14 percent of GDP, again double the average of the past 40 years. That’s taking into account the good news that Podesta heralded in his tweet.
Put those together and the government will be spending on entitlement programs and interest alone just about what it spends today on the entire budget. Everything else — schools, pre-K, Pell grants, national parks, mass transit, housing subsidies — will get squeezed, or taxes will soar, or both.
Ad-Free & Subscriber Log-In