Taxes and the Budget: How much spending is uncontrollable?
Certain types of government spending are often described as "uncontrollable." In the case of entitlements, this uncontrollability is more a political matter than based on any legal or real constraints. Total "uncontrollable" spending-entitlements, other mandatory spending, and net interest on the public debt-has been growing much more rapidly than total spending in recent decades and thus accounts for an ever-larger share of the total.
- Whereas discretionary programs are funded by specific appropriations that generally last only one year, entitlement spending, such as for Social Security and Medicare, is ongoing. The laws establishing entitlements specify who is eligible for benefits and describe the nature of the benefit. The government then pays the cost of the benefits for as many eligible individuals as show up to claim them. Thus total entitlement spending cannot be predicted with precision from year to year and is in this sense "uncontrollable."
- As a matter of law, entitlement spending can be curbed by changing eligibility criteria or the nature of the benefit. But this requires Congress to actively intervene to change the law, and the resulting cuts in spending growth are usually highly unpopular. In contrast, unless renewed, a discretionary program will automatically go out of existence when its funding expires. To cut discretionary spending, then, Congress need simply not renew the program. It is therefore often assumed that it is easier to control discretionary than entitlement spending. But the difference should not be exaggerated. Cuts in appropriations from year to year can also be highly unpopular and politically difficult.
- There is another sense in which entitlements are "uncontrollable." The cost of the three largest-Social Security, Medicare, and Medicaid-is rising much more rapidly than tax revenue and than GDP, because of the aging of our society and the explosion of health care costs. But, again, this excess growth is not inevitable. If Social Security were indexed less generously, and if Medicare and Medicaid were placed on a fixed budget like the universal health care systems of Canada and the United Kingdom, they would instantly become more controllable. Other major entitlements, such as the earned income credit, food stamps, and civilian and military pensions are not projected to grow faster than GDP.
- Other forms of mandatory spending usually arise because of contractual obligations, for example for the procurement of goods and services. In addition, the government may have to pay damages when it loses lawsuits.
- In fiscal 1962 mandatory spending (including entitlements) and net interest constituted only 26.1 percent of total spending. By fiscal 2006 they had grown to 61.7 percent. Nevertheless, the overall tax burden has remained relatively constant because defense spending fell over the same period from 49.2 percent of total spending to 19.6 percent. The percentage of total spending devoted to nondefense discretionary programs is about the same in 2006 as it was in 1962, but there have been significant ups and downs over the period.