William Francis Sutton Jr. (June 30, 1901 – November 2, 1980) was a prolific American bank robber. During his forty-year robbery career, he stole an estimated $2 million. Although he escaped from jail three different times, he eventually spent more than half of his adult life in prison. We thought of Willie these past few weeks when questions arose about the US debt ceiling. Generally speaking, while Democrats want to cleanly raise the debt ceiling without any qualification, Republicans want to tie an increase with cuts to US federal spending.
There certainly is a desperate need to cut Federal spending. Earlier this month, the Congressional Budget Office (CBO) projected that the nation’s federal budget deficit would reach $1.4 trillion for fiscal 2023, $400 billion higher (28%) than its May 2022 estimate. To make matters worse, the nation’s annual budget deficits are projected to average $2 trillion over roughly the next decade. This is a massive increase in debt, and as we state on the front page of our blog, it is the real existential threat. Unless something is done, it will ultimately lead to “an over-leveraged economy that is burdened by a huge and growing debt, one which is increasing likely to lead to runaway inflation or to a debilitating deflation.”
Where to cut? That’s where Willie Sutton comes in. There is an apocryphal story that when Sutton was asked by reporter why he robbed banks, he famously replied: "Because that's where the money is." Paraphrasing Willie’s advice, if you really want to significantly cut spending, instead of just talking about it, you need to look where the spending is. Where might that be? In our December article, Mandatory Monies, we pointed out that “in 2022, mandatory spending comprises 71% of all spending, leaving only 13% for defense and only 16% for domestic discretionary spending.” We have further pointed out that in the last Congress, Republicans and Democrats compromised, with Republicans supporting the Democrats with close to a 10% increase in social spending in return for Democrats supporting a 10% increase in Defense spending. Given these facts, it should be very obvious that if you want to significantly reduce spending, you need to focus on entitlement (mandatory) spending – Social Security, Medicaid, Medicare and Obama Care.
Fat Chance of that! Despite the fact that, in the past, he has previously called for Social Security benefit cuts (see Link below), President Biden used his State of the Union Address to pummel Republicans politically, saying that some of them want to slash and/or gut these popular retirement programs. Republican House Speaker Kevin McCarthy responded to the President’s attack, saying that Social Security and Medicare should be exempt from any spending cuts. Even former President Trump jumped into the fray, warning House Republicans not to touch Social Security.
Unfortunately, this bi-partisan point of view to protect entitlement programs is extremely short-sighted, for Social Security and Medicare are in serious financial trouble, and they are in dire need of reform. The nonpartisan Congressional Budget Office says spending for both Social Security and Medicare is growing much faster than the rate of federal tax revenues which support them. The Social Security Trustees, led by chief Trustee/Treasury Secretary Janet Yellen, estimate that unless fixes are made, the Social Security Trust Fund will run out of money in nine years, After that, it estimates that retirees would get just 77% of their benefits. In addition, the Medicare Board of Trustees projects that Medicare’s Hospital Insurance trust fund will be depleted in 2028.
We believe that the United States is in desperate need of a real leader – a President who is not afraid to make difficult decisions. We need a leader with the courage to find real solutions to the problem of runaway deficit spending, while reforming and slowing the growth of the mandatory entitlement programs at the same time. We’ve had such leaders in the past. In 1983, President Ronald Reagan, facing a Democratic majority in the House of Representatives, forged a compromise with House Speaker Tip O’Neil, which extended the social Security Trust Fund’s solvency for a couple of generations. The most recent leader in regard to reforming entitlement programs has to be former Republican House Speaker Paul Ryan. He had the courage to propose reforms to Medicare and Medicaid, while tying it to the elimination of then recently passed Obama Care legislation. This attempt failed, and so we move merrily along, with spending and deficits climbing to unimaginable heights.
By their recent statements, Biden, McCarthy and Trump certainly do not have that courage, for they have not offered any reasonable plan to slow the increases in entitlement spending, which is desperately needed if we are to have any hope of passing on a financially sound economy to our children and grandchildren. Is there anybody out there with that courage? Maybe. Former South Carolina Governor and US United Nations Ambassador Nikki Haley has just announced her intention to run for the Republican nomination for President in 2024. Speaking recently to Fox Business host Neil Cavuto, she said: “What they need to be doing is looking at entitlements,” she told Cavuto. “Look at Social Security, look at Medicaid, look at Medicare — look at these things, and let’s actually go to the heart of what’s causing government to grow.”
So, Nikki and Willie agree – you have to look where the money is! Let’s now see if she has the courage to make specific proposals which will meaningfully slow entitlement spending, and help put our financial house in order.
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