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Entitlements

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Here’s why it’s hard for the U.S. government to keep its costs down: Seniors and the very poor are entitled by law to almost half its money. Congress can trim other expenses, and automatic budget cuts and the cessation of two U.S. wars have slowed spending growth. But Social Security, Medicare and Medicaid are exempt from budget wrangling and are growing: from $2 trillion, or 47 percent of the 2016 budget to an estimated $3.5 trillion, or 56 percent of the budget, by 2026. Over the decades, these three programs have attracted the mildly pejorative term “entitlements” along with debate about their long-term fiscal health. Nonetheless, for 30 years attempts to contain their cost to taxpayers have failed.

The federal deficit narrowed through 2015 but is now widening, in part due to entitlement costs. For Social Security, there were 16 workers paying into the system for every person drawing benefits when payments began in 1940; the ratio of workers to beneficiaries is expected to fall to 2-to-1 by 2035. The Congressional Budget Office offered 79 options to reduce the deficit in November 2014, including reducing Social Security benefits for new beneficiaries and increasing Medicare premiums. These aren’t likely to be enacted — Treasury Secretary Steven Mnuchin has said these programs won’t be touched in President Donald Trump’s first budget proposal. In fact, cuts of any type are hard to sell. In 2013, when lawmakers agreed to reduce military pension benefits by $6.2 billion from 2014 to 2023, veterans’ groups protested. Lawmakers restored $5.7 billion two months later. Still, the U.S. welfare state, accounting for about 19 percent of gross domestic product, is small compared with those of many developed countries. In France and Finland, social programs consume more than 30 percent of GDP.