Dead On Arrival

The President has proposed a budget for 2021 as is his duty, but don’t expect it to pass unscathed. The Left is already pronouncing it “DOA” and there is enough in the proposal to make just about everybody mad at him. The fundamental flaw, which stands out immediately, is that it requires 3 percent economic growth for the next 15 years to have even the slimmest hope of balancing itself and reducing the deficit.

And that’s the good news in it.

It’s a $4.8 trillion whopper of a budget which reflects generally conservative priorities like cuts to foreign aid, environmental protection, federal education programs, and transportation. It also would slow growth in Medicaid from an automatic increase of 5 percent to a more modest 2 percent. (In DC when you reduce the rate of automatic growth of a government program the reduction is denounced as a “cut.”)

Recalling reforms to welfare state programs under the Clinton administration (which were ended under the Obama administration), Trump’s budget calls for work requirements for public assistance programs, will not be popular with Democrats.

Putting Your Mortgage On Your Visa Card

Most of the budget’s deficit reduction measures come from cuts to Discretionary Spending, which amounts to only about 40 percent of the total budget, while Mandatory spending programs like Social Security, Medicare and Medicaid reach now almost 60 percent.

It wasn’t always that way: In the 1960s Mandatory Spending was only 33 percent of the budget, but ever since then, it has been swallowing more and more of the total. It is projected to be 80 percent of the budget by the next 10 years. And that is the real problem the country is facing: Eventually, entitlement programs like these will take over the entire budget and discretionary spending on things like the national defense will be added to a deficit that is expected to become 80 percent of our GDP.

Imagine paying all your bills with cash, but putting your mortgage on your Visa card and you get the idea.

There is an argument that goes: “if the economy is prosperous then fewer people need social welfare programs and we can reduce their burden that way.” There is some merit to that, but it’s offset by demographics: the Babyboomer Generation is aging out of the workforce at a rate of 10,000 a day. That means that 3,650,000 Boomers are reaching age 65 and become eligible for benefits from Social Security and Medicare.

All the Boomers will have reached age 65 by 2030. That’s over 36 million people eligible for these Mandatory spending programs — the largest number of Americans ever eligible in history. This means that the automatic spending needed to fund these programs will dramatically increase even as the number of people paying into these programs in the workplace decreases.

As far as I can tell, the budget does not account for the demographic bomb falling on these programs. It seems to assume that the demand will remain a flat line, which it could if the retirees were denied the benefits or the healthcare that would allow them to live much past retirement age. And if you don’t think that denying care to the elderly would not be a method of controlling costs in a One-Payer-Healthcare-System you are kidding yourself: It will be a feature of that kind of system, just as it is in other countries where it has been used.

In 2016, then-candidate Trump had promised that he would eliminate the entire national debt in eight years by growing the economy by 8 percent a year, which would produce a corresponding increase in tax revenue that would be used to pay off that debt. Economic growth has averaged about 3 percent and long term projections expect that two to three percent is as good as it will get. Rather than reduce the debt, President Trump added over $1 trillion a year to it.

In the past three years, the President has a reasonable track record for keeping the promises he made to get elected, and the budget deficit was definitely one of them. But this budget doesn’t even come close.