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Social Security and Medicare Could Cripple National Security
When giving public or semi-public talks, I have long been asked “What single threat worries you the most? What keeps you up at night?” When I served as a senior CIA official from 2006 to 2013, and after a long career as an intelligence analyst, I felt I needed a national-security-related answer to those questions; so, I said “terrorists with nuclear weapons.”
But there was something else that, even back then, worried me more than the nightmare scenario of a nuclear-related terrorist attack, as devastating as that would be – and that was, and is, the failure of our political leaders on both sides of the aisle to come together, to deal with the most important issues facing the country, and to make compromises that move our economy and society forward.
Why is this a national security issue? Because the most important determinant of a country’s power, and therefore its national security, is the health of its economy and society. Paul Kennedy’s 1987 best-selling book, “The Rise and Fall of Great Powers,” is all one needs to read to fully understand that point. I have seen that dynamic play out firsthand throughout my career, with China being the premier example.
The coming crisis in spending on federal government entitlement programs is one of the most significant issues that we are not facing as a nation. If we do not deal with it, it will have devastating consequences for economic growth. And, it will undermine our national security – both indirectly because of the economic fallout and directly because of the budget impact. On the latter, without entitlement reform, we will simply not be able to fund the defense, intelligence and diplomatic programs that are necessary to keep the nation safe.
Entitlements are government programs where the law as written “entitles” the public to a government payment if they meet certain criteria. The government has no choice but to write a check; it is “mandatory” spending on the government’s part. Entitlement programs include Social Security, Medicare, Medicaid and other supplemental income security programs. Spending on these programs is rising rapidly as our population ages and as health care costs soar. The share of the U.S. population over 65 years of age is expected to rise to over 20 percent by 2030, up from 13 percent in 2020, while health care costs substantially outpace inflation year after year.
According to the Congressional Budget Office (CBO), entitlement spending in fiscal year 2016 (the year ending Sept. 30, 2016) accounted for 63 percent of federal spending, up from 53 percent in fiscal year 2000. With 6 percent of budget going to interest payments on the debt, only 31 percent of the budget was available for discretionary programs, including the defense of the nation, which accounts for over half of all discretionary spending (and which currently is insufficient to ensure our security, according to defense experts, no matter what their political affiliation).
Without entitlement reform, the CBO, in its baseline estimate made in the summer of 2017, projected that in fiscal year 2027, entitlement spending will account for 65 percent of the budget and that interest on the debt, in an almost certain higher interest rate environment, will amount to 12 percent of the budget. That will leave only 23 percent for discretionary spending. These numbers will only get worse in the out years. The recent changes to the tax code are not likely to alter these numbers in any meaningful way.
Calculated as a share of total government revenues, the numbers become even more stark. In fiscal year 2016, mandatory spending – entitlements and interest payments – accounted for 82 percent of revenues, up from 58 percent in fiscal year 2000. By fiscal year 2027, that number will rise to 99 percent, leaving only 1 percent for discretionary spending.
In this environment, the only way to achieve the spending on defense, intelligence, diplomacy and foreign aid that we need to protect the country would be to significantly raise taxes, which would be a further drag on the economy, or to allow the budget deficit to soar even beyond what is currently projected. When interest rates finally begin to reflect the substantial increase in federal debt, the effect will be to slow private investment, thereby slowing long-term growth.
All of this has long been well understood by most members of Congress, but they have not shown the political will to deal with it. It is less well understood by national security experts. The latter need to become educated about it and need to become advocates for reform of entitlement programs – because it is a ticking time bomb to our security.
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How about eliminating the cut off point to Social Security to infinity of wages paid? Considering just how many people earn over the cut off point, which adds to the inequity in the U.S. population. Or, how about reducing the Military foot print, ending the wasteful war on terror? The U.S.Military hasn’t been able to beat the foes it has engaged since WW 2, though many will argue this point. The present direction being taken today, looks more like getting ready for a “Hail Mary Pass” in the making, especially with the threats of using Nuclear bombs as a first strike.
Taxing those earnings above $128K is just a drop in the bucket. The national debt is $20,000 Billion. The NPV (Net Present Value) of unfunded entitlements is an additional ~$75,000 Billion. Today we are servicing the debt at a little less than 3% interest rate. Average historic rate has been 5% – at that rate just Servicing the debt will exceed a Trillion a year ($1,000+ Billion/year). Politicians of yesteryear bought our votes with entitlements knowing the bill won’t be paid til they’re long gone… our kids, grandkids and great grandkids are so screwed. We can complain all we want but we bought into the promises and that the problem was way off. Our weak politicians played the math-challenged American population… now we’re going to get it good and hard. This is how nations die.
Mr Morell, with all due respect, I think your opinion piece is severely misguided.
Before Social Security was created 1 in 2 Seniors were impoverished. Recent polls show that 87% of Americans believe that Social Security is extremely important. 54% of American households will depend solely on Social Security to put food on the table and keep the lights on during their senior years.
One simple way of shoring up finances for Social Security’s future would be to eliminate the upper end cap on payments into the system. I believe this upper limit hovers around $128,000/yr. presently, taxing the extreme wealth inequality would be a great start. Another way would to implement progressive taxes and dedicate the money to social security, such as a portion of The Estate Tax.
Another suggestion would be to divert funds from the Defense Department or other extremely bloated Departments.
Perhaps a tax on stock speculation?
What were the tax brackets prior to 1970? Perhaps the dramatic shift from historical norms is the real reason for the lack of funds for the “entitlements”?
Perhaps healthcare cost would come down if instead of eliminating coverage, we expanded it as Medicare for all!!
Once the $ is worthless 9 out of 10 seniors will be impoverished.
Concerning our growing rate of entitlement spending, I have always wondered why the U.S. does not follow the model of other European countries and raise enough taxes to cover entitlements. Why are we, as a people, so allergic to pooling our monies to pay for public expenses? I, for one, would be happy to pay more taxes to programs which would provide this “insurance” to all Americans in our older years. This past tax bill missed an opportunity, in my mind.
see Universal Basic Income, “moral hazard” and successful large Socialist states. Europe is going broke too.
From a national security viewpoint, what kind of compromises must be made? What are he upsides and downsides of such compromises?
The days of just saying “do something” are over.
This assessment should be widely distributed. The resources dispensed to beneficiaries of US entitlement programs should be tailored more toward those who contribute to it. In our society where political correctness leads to an atmosphere of self-censorship, it is difficult to voice the matter of say, family members of new US citizens whom absorb the largess of our medical system yet have never paid taxes. With nationalism on the rise, this topic becomes even more difficult to breach yet as a naturalized US citizen, it is uncomfortable for me to see the irony behind relatives enjoying US entitlement programs yet who hold politically denigrating views of the US. This is in microcosm a threat to national security or, simply a personal affront.
“Entitlements are government programs where the law as written “entitles” the public to a government payment if they meet certain criteria.”
The public feels “entitled” to these “government payments” because the government deducts money from every paycheck labelled as contributions to Social Security and Medicare. So I feel as though I’ve contributed a lot of money to MY Social Security & Medicare. And I don’t appreciate people like you insinuating that I am looking for a handout.
When you probably have an awesome pension and I am a Gen Xer who never had any opportunity for a pension. So, yeah, the little people will react badly if the smug & entitled decide to solve the nation’s problem by impoverishing and denying healthcare to future generations of retirees.
Perhaps the Federal Government need to learn the following:
1. CUT WASTE
2. Reduce Spending
It’s that simple, the government has turned into a bloated whale and its time to trim the fat and that’s across the board, not just entitlement programs.
Probably the best example of waste is within the IC, we do not need 17 different organizations.
DHS/TSA can go away. We didn’t need them prior to 2001 and frankly how many congressional reports do we need to see, showing they have produced nothing of value, before we take action.
Likewise it’s time we rethink National Intelligence and do we really need NSA, DIA, CIA and NGA or could we get by with 2 organization DIA to support DoD and NIA (National Intelligence Agency) to support policy makers.
DoD is ripe for consolidation, particularly in fields where there are common service, finance, medical, IT, Legal, R&D, etc.
These are just a few examples
It’s time for a top down review of every organization, program and position within the federal government
This was a very important piece to write and took a lot of guts in my opinion. Earned Benefits (not entitlements) are the third rail of politics. Everyone agrees we need to adjust our system.. small step would be increasing the age for Medicare to 70 for those making over $75,000 (regionally adjusted). Step by step we can make progress on this front as long as the DOD can clean their house and trim 10% as well. That 10% can be invested in the Gray theatre – Cyber, Development, State, and Peace Corps and it would revolutionize everything. Our interest on the debt is literally funding China’s military buildup.
This would be incredibly unpopular with older conservative voters, but would be very popular with younger millennials. One key point that not many people talk about today is that millennials are now the largest veteran population block today. We’ve asked this generation to do so much with really bad political advice, guidance, and wisdom. It’s time for the older generation to give more than they get in my opinion.