By Jennifer Nicoll Victor, Ph.D., George Mason University
Programs like Social Security, Medicare, and Medicaid are enormously expensive and are an increasing share of the federal budget. With the increased pressure of demographics and financial change, what is the status of these programs? Are they in crisis, or are they in a financially stable situation?
Social Safety Net
If all government programs referred to as mandatory spending are added together because they are entitlement programs enshrined in federal law, they make up about 60% of total government expenditures. This includes the outlays the federal government makes to beneficiaries of Social Security, Medicare, Medicaid, food stamps, unemployment insurance, veterans’ disability benefits, and federal civilian and military retirement programs.
Together, these programs form the social safety net through which the federal government aims to keep Americans in good health and out of poverty.
Both Social Security and Medicare have trust funds that have built up over the years and they draw from those funds to cover the difference between outlays and income. In addition, when the Affordable Care Act was passed in 2010, it affected changes to the Medicare system that significantly improved its financial footing.
While estimates about solvency change all the time, it’s not exactly like these programs are in crisis mode at the moment.
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Making Social Programs Financially Sound
If no changes are made to these critical social programs, then government will not have enough money to give future retirees the full benefits to which they will be entitled by law. However, it’s reasonable to expect that changes will be made to the system that will affect this possibility.
When politicians talk about shoring up these programs for their long-term health, the policy proposals can get awfully complicated. When it comes down to it, there really are only two ways to make these programs financially sound in the long term: one either has to raise taxes or reduce benefits. Or, do both of these together.
Typically, the most popular ideas are those that tend to hit higher income earners the hardest, including raising or eliminating the cap on taxed income, and eliminating benefits for retirees who still earn high incomes, even upon retirement. Both of those options fall under the category of raising taxes. Alternatively, some people talk about raising the retirement age, or lowering the amount of benefits provided.
Building Political Consensus
While it’s difficult to build political consensus for all the various proposals out there for amending these programs, changes will be made at the last possible moment and in a manner that spreads the pain around in a compromised fashion.
Together, the system of federal, state, and local programs that government runs to alleviate poverty and provide Americans with basic living needs like access to health care form the welfare state of the United States. The politics of these social and economic programs can be controversial for a few reasons.
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Democrats versus Republicans
Political parties have aligned with philosophies and policy preferences that generate opposite positions on government assistance programs.
Liberal ideology and philosophy have aligned with the Democratic Party and emphasizes equality, tolerance, and human rights. As such, the party has included defending the welfare state as part of its policy agenda for the last number of years.
Likewise, the conservative ideology and philosophy that has aligned with the Republican Party emphasizes liberties, individualism, and maintaining current power hierarchies.
To some extent, massive programs like Social Security and Medicare cut across these political lines because Democrats and Republicans both pay into, and benefit from, these programs.
Misconceptions about Welfare Programs
However, there are a lot of misconceptions about what these Social Security and Medicare programs are, who pays for them, and who they benefit.
Some conservatives, for example, worry that entitlement programs create a dependent class of citizens who rely on government for subsistence, when they could be self-sufficient. And there is a perception that some government programs promote laziness or abuse.
While any program that is so large is bound to have some bad actors who take advantage of things, the data from these programs show that they benefit people who need the help and they genuinely serve the public. That said, it’s appropriate to place reasonable limits on government programs, and to make policy choices that place them on sustainable financial footing.
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Benefits Delivered by the Government
Ultimately, social policy programs form the basis of many individuals’ personal relationship with the government. However, it’s also important to recognize that many people benefit from government services in less tangible ways. While we tend to think of entitlement programs and transfer programs as the primary ways that the government delivers benefits, it also delivers benefits to people through economic policies and other regulations.
Social and economic policies often become politicized and controversial when people feel that some groups have received undeserved benefits, relative to the benefits they themselves have received. But it’s important for people to learn about all the ways that government benefits people.
In theory, economic regulations promote market efficiencies, and social regulations give people equal opportunities to thrive.
In practice, policies are complex and imperfect. It’s helpful to take a step back to understand where they came from, how they work, and what their intended purpose is. The idea is for government to make policies that promote the public good, and on the whole, the US government does a fairly good job at delivering on these core responsibilities.
Common Questions about the Welfare State of the United States
The government programs referred to as mandatory spending include the outlays the federal government makes to beneficiaries of Social Security, Medicare, Medicaid, food stamps, unemployment insurance, veterans’ disability benefits, and federal civilian and military retirement programs.
Liberal ideology and philosophy have aligned with the Democratic Party and emphasize equality, tolerance, and human rights. The party has included defending the welfare state as part of its policy agenda for many years.
Social and economic policies often become politicized and controversial when people feel that some groups have received undeserved benefits, relative to the benefits they themselves have received.