Tax cuts passed in 2017 under the promise that they would pay for themselves from economic growth has proven to be only half-right.
There is no question that the United States continued almost a decade of economic growth, with an even more explosive economy in 2018. But, the net result has been anything but budget neutral.
In 2017, the Congressional Budget Office reported that the budget deficit grew to $898 billion, and projections have the deficit reaching $1 trillion in 2019, a startling rise that has Congressional leadership hinting at offsetting it through cuts to entitlement programs that include Social Security, Medicare and Medicaid.
There is no denying that these programs together are a huge percentage of the federal budget, consuming at least 50 cents of every dollar spent, according to the Office of Management Budget. And, with an aging population driven by 10,000 baby boomers turning 65 every day in this country, the pressure on the federal budget from these entitlement programs will only escalate.
Outgoing Speaker of the House Paul Ryan told The Weekly Standard in April that entitlement reform was the policy goal “that got away.” Senate Majority Leader Mitch McConnell told Bloomberg on Oct. 16 that the rising deficit was driven by “the three big entitlement programs that are very popular, Medicare, Social Security and Medicaid,” but, in the face of Democrats retaking the House, he bemoaned the inability to get entitlement cuts passed without Republicans controlling both the House and Senate.
When the Tax Reform Act was being debated, supporters of the measure promised that not only would newly stimulated economic activity offset the cuts from a budget deficit standpoint, it could even bring the budget closer to balanced once again as it was in the mid-1990s.
The American economic engine continues to churn at an impressive rate, but this payoff has not materialized. The question now is: do we fix this imbalance by taking money away primarily from seniors?
The total cost of the three entitlement programs is daunting. According to statistics compiled by the Henry J. Kaiser Foundation, total spending by Medicaid was $577 billion in 2017 to cover 73 million people, but the budget is shared by the states and the federal portion is reduced to $355 billion or about one-tenth of the federal budget.
Medicare is federally funded but is is partially funded by beneficiary premiums, costing over $702 billion to cover 55 million people in 2017. Social Security, funded by payroll taxes, spent over $1 trillion for the first time in 2017 providing financial support for 61.9 million seniors, or one out of every six Americans, with an average payout reaching $1,422 a month per recipient this year.
What is the fiscal and societal impact of reducing SS payments to seniors while cutting Medicare and Medicaid? People will still need food, healthcare, and a roof over their head -- and that will need to be paid by someone. Does it get pushed into strained state budgets? Do families already struggling as part of the sandwich generation paying for the costs of their own families, dig even deeper into their pockets to spend more on their parents? All of this has a ripple effect one way or another in our economy and for our national psyche.
A far better approach is to not ignore the contributing impact that tax cuts has had on the budget deficit, and to not ignore the reality of the costs associated with caring for our aging population.
A balanced budget will require a balanced approach. Meaningful entitlement reform is necessary to assure the longevity of these programs, but it isn’t fair to place all the blame and burden for the budget deficit on seniors and their families.
Chris Orestis, executive vice president of GWG Life, has more than 20 years of experience in the insurance and long-term care industries and is nationally recognized as a healthcare expert and senior care advocate.
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