Dance With the One Who Brung You

Eakinomics: Dance With the One Who Brung You  “Dance with the one who brung you” is an old proverb that is a reminder to be considerate and loyal to the one who has been supportive, attentive, or helpful to you.  At this point, it should apply as well to the federal social safety net. The progressives’ dalliance with creating a whole new safety net in the Build Back Better Act appears to have hit the iceberg named reality. Good. But what has been especially shameful about the episode has been the charm (aka, taxpayer dollars) that the left has been willing to shower on the newbies while utterly neglecting the core planks of the safety net that brought the U.S. populace to the present. Those planks are rotting and in need of repair. To get a feel for the issue, consider the charts (below) depicting the outlook for the Old Age and Survivors Insurance (OASI, aka Social Security retirement), Disability Insurance (DI, Social Security disability), and Hospital Insurance (HI, Medicare inpatient) trust funds. (All the estimates, as well as the graphs, were stolen from the recent Congressional Budget Office study on the outlook for federal trust funds.) First, a word on trust funds. Having money in a trust fund gives the programs the legal authority to pay benefits. When the trust fund goes bankrupt, spending must get cut back to whatever dollars happen to flow in that year. In the past some trust funds accumulated more inflows than benefits. In those circumstances, the actual money was given to the Treasury in exchange for securities that paid interest. That is why each graph shows a deficit with and without interest. While the interest allows the programs to keep paying benefits, it does not ease the burden of that spending. From the perspective of the budget as a whole, transferring interest from the Treasury to the trust funds is just accounting. Treasury still must either raise taxes or borrow to come up with the money. So, here is the picture: OASI Trust Fund goes bankrupt in 2031. DI Trust Fund goes bankrupt in 2026. HI Trust Fund goes bankrupt in 2024. What do we learn? There are three major lessons. Lesson 1: The trust funds all exhaust in the next decade; in some cases, like HI, it is in the next several years. The social safety net is in terrible financial shape. Lesson 2: The deficits are the dominant source of overall red ink over the next decade. If anyone is going to get serious about the federal deficit, take aim at controlling the federal debt, or otherwise transform the federal budget away from being a threat to the U.S. economy, they must come to terms with a financially viable future for the social safety net. Lesson 3: Nobody is talking about this. Nobody is admitting there is a problem. Nobody is talking about Social Security reforms. Nobody is coming up with a fix for the HI trust fund. Everybody has been so entranced by the matchmaking at the BBBA Safety Net Ball that they are not doing their job. It is time to dance with the ones who brung us here.