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We are gutting government.
It is an extreme irony of the Obama presidency that a proud liberal — someone who believes in government's constructive role — is presiding over the harshest squeeze on government since World War II. What's happening is simple: Spending on the elderly and health care is slowly overwhelming the rest of the federal government. Spending on other vital activities (from defense to financial regulation) is being sacrificed to cover the growing costs of a graying nation.
This is the central budget issue of our time. It is largely ignored, as it was in the recent unveiling of the administration's 2016 budget. President Obama consistently avoids it; most Republicans take refuge in his silence. Without political leaders to define the debate, the media find it hard to clarify the conflicts and choices. Policy proceeds by default: Spending on the elderly receives a pass; cuts fall on other programs.
The result is a spectacular skewing of priorities. Anyone who doubts this should study the 2016 budget documents.
Start with the Congressional Budget Office. Based on current laws, the CBO projects that annual federal spending will grow by $2.6 trillion, or 75 percent, between 2014 and 2025. Almost 90 percent of the increase comes from three sources: Social Security, health spending (heavily tilted toward the elderly despite recent Medicare savings) and interest on the federal debt. Spending on most other programs doesn't keep pace with inflation.
We know this from Obama's budget documents. One table adjusts major spending categories for inflation and population increases. From 2016 to 2025, "real" population-adjusted spending grows 27 percent for Social Security and 24 percent for Medicare, while spending drops 19 percent for defense and 17 percent for "domestic discretionary" programs. ("Domestic discretionary" spending is a catch-all that includes law enforcement, housing, education, energy, food safety and more.)
What the dry figures don't convey is the degradation of government at the agency and program level. This is occurring, though documenting its extent is hard. Francis Collins, head of the National Institutes of Health, estimates that the agency's budget has lost nearly 25 percent of its purchasing power in the last decade. NIH used to approve one of three grant proposals; the ratio now is one of six. Presumably, younger researchers suffer most. Some public-health problems (say, resistance to existing antibiotics) may be underfunded.
The Internal Revenue Service blames budget cuts and reduced staffing for delays in mailing refunds and responding to taxpayer questions. In 2014, only about two-thirds of callers got through to an agent, and waiting times averaged nearly 20 minutes. (In 2004, nearly 90 percent got through, with typical waiting times of 2.5 minutes.) The national parks have also been hit. Since 2010, their funding has decreased 12 percent in inflation-adjusted dollars, and the backlog of deferred maintenance has topped $11 billion, says the National Parks Conservation Association, an advocacy group.
We are allowing demographics to determine national priorities. Nowhere is this more apparent than defense, which is scaling back (the Army alone is cutting an estimated 120,000 active-duty troops from its wartime peak) just when foreign threats seem to be rising. So demographics even shape global strategy.
It's the path of least resistance. Ideally, we would eliminate nonessential and ineffective programs (farm subsidies, Amtrak), begin to trim Social Security and Medicare benefits (gradual increases in eligibility ages and lower benefits for wealthier recipients), and pay for the rest of government with higher taxes. But both Obama and Republicans evade this unpopular exercise.
Instead, they've embraced a policy of slow-motion spending strangulation. The problem is not the "sequester," which automatically cuts outlays. It is the spending limits required to stay within the outlay "caps" needed to avoid sequester. Though the effect in any single year is modest, the cumulative impact is huge. Since 1990, spending on defense and domestic discretionary programs has averaged 7.4 percent of national income (gross domestic product). In 2014, that was 6.8 percent of GDP, near a post-World War II low. Under Obama's budget, it's projected at 4.5 percent in 2025.
At some point, this ratcheting down of spending may become politically unsustainable. (Note: Obama has already proposed increases for national parks.) To the extent that Obama's budget projections reflect unrealistic spending assumptions, future deficits are understated.
We all ought to want effective and efficient government. But government is being strangled as the rising costs of baby-boomer retirees reduce the capacity of other programs to fulfill their missions. Obama would worsen the problem. Unable to pay for existing programs, he would add more (for "free" community college and more preschool programs, among other things) that would intensify the competition for scarce funds.
Obama imagines himself a champion of better government. In reality, he is an agent of gutted government.
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Previously:
• 02/05/15: College is no panacea
• 02/02/15: What if everything we know about the 'housing bubble' turned out to be wrong?
• 01/29/15: Austerity on trial: The world watches as 'it's Greek' changes its meaning
• 01/26/15: How other nations' troubles could slow U.S. growth
• 01/22/15: Setting the record straight on Reagan, Volcker and inflation: Part 2
• 01/19/15: Economists are baffled about Obama's recovery
• 01/14/15: 'Dynamic' deceptions: Washington's enlightened budgeting vs. cooking the books
• 01/12/15: Who stopped inflation? Volcker, Reagan and history
• 01/08/15: Europe's other unending crisis
• 01/05/15: Is the economic slog really over?
• 01/02/15: Five economic stories to watch in 2015
• 12/29/14: 'Helping' the middle class won't fix its psychological problems
