Republican presidential candidate Nikki Haley got to the heart of the government shutdown fireworks in her appearance on Fox News Sunday.
“Let’s be clear what the Freedom Caucus is really trying to do; they are trying to cut spending.”
That’s of course correct. One would be hard-pressed to find any Republican, Freedom Caucus member or not, who does not understand the gravity of the state of our federal budget and spending.
Unfortunately, now we have a small group of Republicans doing what liberals do—looking for whom to blame. You would think that House Speaker Kevin McCarthy is personally responsible for $33 trillion in national debt and a $2.2 trillion deficit.
McCarthy is sent to do budget battles with his hands tied behind his back. The marching order regarding spending cuts is and has been that only on the table is discretionary spending.
Discretionary spending accounts for 27 percent of the federal budget.
Discretionary spending is funds that Congress has authority to appropriate annually. About half of it is the Defense budget. Given that our Defense spending is currently at a dangerously low level as a percent of GDP, it is, for practical purposes, also off the table.
So, what is left to target for spending cuts is miniscule in the grand scheme of things. The allegation that McCarthy betrayed his party and colleagues by not seriously going to budget war and shutting down the government is a grand distortion.
If we want to turn to reality, the real issue is what no one wants to talk about—the approximately 70 percent of the federal budget that is non-discretionary, which happens automatically.
The major non-discretionary items are interest on the federal debt and entitlement programs—the two largest being Social Security and Medicare.
Interest is a symptom rather than a cause. Interest rates, and hence interest expenditures, have been going up because of all the spending and the inflation that has resulted from this.
So, we wind up staring into the eyes of the elephants in the room.
Social Security and Medicare.
Even our champion of Make America Great Again, former President Donald Trump, has insisted that reform of Social Security and Medicare is off the table.
Federal spending is now around 25 percent of GDP. CBO projects it reaching 30 percent in 30 years. The average from 1962 to 2022 was 20.5 percent.
Most of the growth in that spending comes from interest, Social Security, and Medicare.
We are a far different country today compared to when these programs were enacted—Social Security in 1936, Medicare in 1965.
The costs of Social Security, a retirement system, and Medicare, a health care payment system for the elderly, are driven by the percentage of elderly in the population. Lower birth rates, hence fewer children, and longer life spans means a higher percent of elderly and increasingly costly programs.
The median age in the United States in 1930 was 26.5. In 1960, it was 29.6. In 2021, it was 38.8.
Per a Cato Institute report, “unfunded obligations for Medicare and Social Security are equivalent to $650,000 for every U.S. household.”
Must our citizens take a beating with benefit cuts and retirement age increases? No.
We need to transform from tax-based government systems to market-based systems of ownership. Markets and ownership are what built our country. Our problems began when we start turning to government.
But major change takes courage and leadership. And in this we seem to be sorely lacking.
I invite those Republican members of Congress, so bent on dumping on Speaker McCarthy, who has done his job keeping the nation functioning and moving forward, to step out and speak to the nation regarding how they propose to reform Social Security and Medicare.
And I invite our Republican presidential candidates, including the one currently leading in the polls, to do the same.
