Ezrati's Economic Outlook: The President's Budget

There is no need to dwell on detail to see the way to overall spending control. This White House budget has done what it can outside of entitlements, and the result has made it clear that such a focus is insufficient. The White House budget would cut defense outlays for 2012 and permit so little growth over the following four years that, overall, such spending would increase at a meager 0.8% a year from 2011 to 2016. In addition, the administration plans significant long-term cuts in non-defense discretionary spending. According to these proposals, such outlays would drop more than 8% during these five years, 1.7% a year. And yet, because this budget does little to address the growth in Social Security, Medicare and Medicaid, overall outlays—even apart from the interest expense on the debt—continue to grow at an annual rate of more than 4%  over this time.

The problem with this neglect of entitlements spending is obvious in the changing budget mix projected by the White House. Social Security is budgeted to rise at a 5.4% annual rate during this five-year stretch, Medicaid at a 9.3% rate, and Medicare, where the president’s message at least alluded to cost controls, at a 4.3% rate. The overall increase in these programs exceeds the entire growth of federal outlays (excluding interest expense) by some 30%. These entitlement programs expand from 41.8% of the budget (again, excluding interest expenses) in fiscal 2011 to just under 50% by 2016. They clearly are the story. Without a direct consideration of entitlement cuts, there can be no substantive spending control, even, as this budget shows, with severe constraints elsewhere.