The end of the fiscal year is here, meaning that Congress is scrambling to resolve a host of important budget issues that lawmakers have ignored all year. Most importantly, they must fund the government for the 2016 fiscal year (which begins on October 1st), and come December, they must address the impending debt ceiling.
These last-minute showdowns have become common practice because there is nothing like a crisis to force members to prolong the status quo. Either they can vote for a bill that does nothing to control spending, or they can be blamed for a politically unacceptable outcome such as “shutting down” the government.
The programs in greatest need of reform—the nation’s entitlement programs—will likely go unaddressed, even though they are the primary drivers of spending and debt.
As Congress tees up the first measure—a status quo continuing resolution that keeps the government open for a couple months—here are a few fiscal facts they should not ignore:
- Spending on entitlements and net interest—payments needed to service the debt—is on pace to consume all federal revenues by 2033 (the major entitlements include Social Security, Medicare, Medicaid, and other health care programs). Without harmful tax increases, funding for every other federal program (defense, transportation, etc.) would need to be borrowed.
- Medicare’s unfunded obligations—the dollar value of promised benefits that are not paid for—stand between $28 trillion and $37 trillion, while Social Security has $13.5 trillion of unfunded obligations. This means that over the next 75 years, Social Security and Medicare are promising at least $40 trillion in benefits they cannot pay for, or more than twice the value of today’s entire economy.
- National defense, often blamed for driving up budget deficits, makes up only 17 percent of the budget. Entitlements and transfer payments (income security and other benefits) account for 70 percent of the federal budget.
- Entitlements and net interest account for 85 percent of spending growth through 2024. The biggest drivers are major health programs (32 percent), Social Security (28 percent), and net interest (15 percent), while all other government programs are responsible for 15 percent of spending growth.
- Deficits have not gone away. While deficits have fallen in recent years due to revenue increases and discretionary budget caps, they are expected to rise to trillion-dollar levels within a decade. By 2050, deficits are projected to reach 16 percent of the GDP, compared to just 3 percent today.
- The national debt held by the public today is equivalent to 74 percent of the economy. By 2045, the public debt will stand at 187 percent of GDP—nearly twice the size of the nation’s economic output. To put that in perspective, the government owes nearly $43,000 in public debt for each American. In less than thirty years, the public debt per capita will nearly triple to $163,000.
The facts are in—the nation cannot continue with business as usual. Congress must take bold steps to enact entitlement reform and right the nation’s fiscal course. Congress’ habit of moving from crisis to crisis without real results that improve the nation’s fiscal state must end. As these figures show, time is running out.