Wednesday, July 6, 2011

The Only Solution To Reducing The Deficit Is Entitlement Reform

With the political showdown over raising the ceiling, President Obama, Ron Paul and Gary Johnson and others would have you believe that best way to get out of the red and into the black is to reduce defense spending rather than reductions in entitlement spending. 
For example President Barak Obama and Ron Paul are in agreement that America ought to withdraw from Afghanistan because of the cost incurred in fighting that war. However, the cost of fighting in Afghanistan is a small drop in the bucket compared to the amount of money we spend on entitlements:
Next year the Pentagon plans to spend $107 billion in Afghanistan—this, in comparison to the $3.7 trillion that the Obama team plans to spend overall. Put another way, Afghanistan amounts to all of 0.75 percent of the nation’s $14.1 trillion GDP. So, no—war bonds, scrap drives, and rationing won’t be necessary. Quite the reverse: while the government spends $100 billion on America’s fighting men and women in Afghanistan, it will funnel 20 times that—more than $2 trillion—to its citizen-spectators through Medicare, Social Security, Medicaid, and other varieties of domestic spending.
The amount we spend in fighting terrorists, not just in Afghanistan, Iraq, or Libya but around the globe is tiny in comparison to the amount we spend on entitlements: 
Despite these facts, the anti-war left and right stubbornly contend that defense spending is the main driver of our national debt. They point to the fact that since 9/11, America has increased the amount of money it spends on defense spending. Here's a chart that gives a visual demonstration of their argument: 
While it is true that we have increased our military spending since 9/11, they neglect to give you a fuller picture of how much money we spend on defense in comparison to how much we spend on entitlements:
The problem with entitlement spending is that that it consumes more than half of what we spend currently and we can't even afford it now since these programs are already set to run annual deficits starting this year until it is completely drained in 2037. Furthermore, the amount we will spend on entitlements will continue to grow until we won't be able to afford it in the future
The graph above projects that entitlement spending will consume all revenues by 2052. However, there are other projections that predict that we won't be able to afford entitlements much earlier:
Regardless of the timing of when welfare spending will consume all revenues, the fact remains that while our defense budget has increased since 9/11, it is only a small fraction of the amount we currently spend on and it will continue to be a small fraction of the government's expenses in the future. In fact, we would have to engage in a multitude of wars before defense spending starts to eclipse all the revenue we receive. Conversely, we could eliminate all defense and national security spending, it still wouldn't make a dent in our national debt. 
Even more daring, we could eliminate all spending except entitlement spending and it still won't solve our debt problem.
The truth is that we have been reducing spending on defense while increasing the amount on entitlements since the 1960s:
Ladies and gentlemen, the reality is that defense spending is not something that on course to exceed government revenue. Nor will it ever. Furthermore, defense spending is not on autopilot like entitlement spending is right now. We can control what we spend on wars, weapons, troops, intelligence gathering, research and development and administrative agencies but we can't control what we spend on welfare programs because those expenses are locked in and mandatory. They're automatic. No questions asked.
It amazes me that there are politicians on the left and the right that want cuts in the defense budget despite the mountain of evidence that entitlement spending is the real driver of our deficit and will be in the future. Even the CBO acknowledges this fact.
That means we have a spending problem. Entitlements have taken on a life of its own unless we do something about it. Any denial that entitlement spending is the main driver of our deficit reveals the astounding inability to assess the seriousness of our financial problems and fundamentally skewed set of priorities on what to put on the chopping block. 
We've been cutting defense for a long time now.  We have never made any cuts since the we've started the war on Poverty.  Instead, we've been increasing spending on this war and somehow we're supposed to make more reductions on defense in the real wars we're fighting overseas.  That doesn't make any sense.
Thus, any politician, both on the left or the right, who is too cowardly to take on entitlement reform is not worth remaining on office. Politicians are more concerned alienating the check takers rather than the taxpayers. As a result, they're putting the entire nation at risk, both financially and militarily,  if we do not fix entitlements, just to keep these programs afloat.
The only solution to reducing the deficit is entitlement reform. No other austerity measure will have an impact on shrinking the deficit. The sooner we get on our way to making these reforms, the better our future will be.

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