The Issue No One Is Talking About: Exploding Federal Commitments

Somehow in the political season, there come to be issues of the day that everyone talks about on that day.  These issues can range from the relatively important (e.g., Hillary's breaches of national security while Secretary of State) to the relatively trivial (e.g., Trump's re-tweet of an image of a six-pointed star, alleged to be anti-Semitic).  Meanwhile, as these issues of the day draw away all the attention, everyone's gaze is diverted from what ought to be the main issues.  Even for candidates who constantly protest that they want to get away from whatever they are being asked about right now and "talk about the issues," they almost never want to talk about the really important issues.

For the federal government, in my opinion far and away the overriding issue is:  what the hell are they spending all that money on?  For those not on top of these things, the federal budget for the current 2016 fiscal year (October 1, 2015 to September 30, 2016) is just a hair under $4 trillion (and only a fool would bet on the final total coming in under the $4 trillion by the time things are done).  And the big question is, does the $4 trillion represent intelligent choices of appropriate priorities for the government, or are various programs that have once established a toe-hold now exploding out of control while nobody is paying attention?  

Given the progressive world view of government as the infinite source of costless free money, you would be right to suspect that everyone in the government is only too happy to see spending explode while nobody is watching.  Hey, we're creating perfect fairness and justice here!  Of course, somehow the exploding spending goes for programs just happen to be the domains of the progressive activists and Democratic party supporters.  But it's not corrupt because it's the government!

So let's consider a few examples:

  • Student loans.  When Barack Obama took office in 2009, the amount of outstanding federally-backed student loans was $657 billion according to federal data here.  When I first covered the issue in 2012, the total had just hit $1 trillion; and when I returned to the issue in early 2015 it had broken $1.1 trillion.  Now?  The Q2 2016 number is $1.255 trillion.  Oh, and these numbers don't appear anywhere in the federal budget.  A student loan hits the budget only when the borrower fails to pay and the government has to take the loss.  So how much of the trillion and a quarter will actually be repaid?  Just try to find that out.  It used to be that you could look up the "default rate" and get a good idea, but then the government got into granting every kind of deferment and forbearance you can think of -- like "income-based" repayment plans and write-offs of balances for people who go to work in non-profits and "public service" -- so that they could make the "default rate" look small.  Today they claim the "default rate" is down to 11.7%, but that's only because they are hiding millions and millions of borrowers who are going to be excused without repaying in full.  Easily half of the tril-and-a-quarter will not be repaid; and of course, the tril-and-a-quarter continues to grow daily.  Who benefits from this huge handout?  Of course it's the key Democratic constituency of the Higher Education Blob.
  • Pension guarantees.  Charles Blahous at E21 writes on July 5 about "The Worsening Pension Problem Nobody Talks About."  This one is the crisis in federally-insured multi-employer pension plans.  Haven't heard of those?  The "multi-employer" plans cover workers in industries with lots of employers of workers who all do the same thing.  The classic example is trucking.  Most of the plans are sponsored by unions.  According to a chart in Blahous's article, when President Obama took office in 2009 the federal multi-employer program was thought to be solvent.  The most recent figures are a "$52.3 billion deficit estimate consist[ing] of $54.2 billion in liabilities against only $1.9 billion in assets."  That was quick!  And believe me, this is just the beginning of an explosion to come.   Supposedly the taxpayers are insulated from having to pay for this disaster through the PBGC, which charges premiums to the plans; but of course, when they set this up nobody took account of the fact that unions gradually put their employers out of business.  So like all government insurance programs eventually, the PBGC is dead broke.  The biggest disaster for the moment is the Teamsters' massive so-called "Central States" pension fund, which is coming close to running out of money.  They have recently been knocking on the government's door seeking the inevitable bailout.  Who benefits?  Another key constituency of the Democratic party, labor unions.
  • Food stamps.  When Obama took office in 2009 the number of food stamp recipients was about 33 million, and the annual budget of the program was about $54 billion.  Since then, it's been eight years of economic "recovery."  In the past, food stamp usage increased during recessions and went back down during recoveries.  This time it was the opposite.  Today, the number of recipients is around 46 million, and the budget for the program soared to about $80 billion in 2013, before falling back in 2015 to about $74 billion.  How has that happened?  Part was a loosening of eligibility restrictions, for which the Congress bears much of the responsibility; but a bigger part was overt and aggressive promotion of expansion of the program by the Obama administration.  The good news for this one is that the budget and number of recipients have both declined marginally in the last couple of years.  But why aren't we back down to levels well below where we were in 2009?  Without doubt, this administration believes -- with a good deal of justification -- that recipients of monthly federal handouts are likely to vote for continuation of same.
  • Medicare/Medicaid.  According to data available from CMS here, in 2009 expenditures on Medicare were $499 billion and  on Medicaid $375 billion.  By 2014 it was $619 billion for Medicare and $496 billion for Medicaid.  It all just marches forward on autopilot. Obamacare in particular has caused a great expansion in the ranks of Medicaid beneficiaries.  

I could go on, but you get the picture.  The federal government has long left the world of rational consideration of cost-effectiveness of spending, in favor of massive autopilot increases for whatever programs got themselves in the door at some magical historical moment.  Anyway, it's all way too complicated to focus political attention on.  Let's get back to calling Trump a racist!