Everyday People Matter

Social Security, Medicare and Medicaid Funding at Risk with Demands for a Balanced Budget

On Behalf of | Mar 28, 2023 | Balanced budget, Congressional spending

Recently House Republicans, specifically The Freedom Caucus, proposed capping discretionary spending to 2022 levels and remaining at that level for the next decade in an effort to balance the federal budget in 10 years without raising taxes.  The plan involves rescinding unspent pandemic funds, repealing mandatory spending under current infrastructure, climate, tax and health laws

In order to balance the budget in 10 years, the government would need to reduce spending or increase revenue by a significant amount.  Without increasing taxes, balancing the federal budget in 10 years could require a significant cut to federal programs, including Social Security, because these programs account for a large portion of the federal budget.  Congress allocates over half of all discretionary spending to national defense.  The remainder funds the administration of other agencies and programs.

Social Security, in particular, is one of the largest federal programs, accounting for roughly a quarter of all federal discretionary spending.  Some of the funding for Social Security programs does not come from discretionary spending, but rather mandated funding through payroll taxes. Another 25% of federal spending from non-discretionary spending (i.e. payroll tax funding) accounts for the remaining budget for Social Security and Medicare.  Cuts could not be made to mandated spending absent specific legislation.  However, funding for the Social Security Trust always remains at risk as the trustees report that funding is predicted to dip below a level sufficient to pay 100% of benefits in 2035.

Forbes Magazine reports that without tax increases and without cutting defense spending, Congress would have to trim Social Security, Medicare, Medicaid and other domestic programs by 20 trillion dollars.  This would require a 41% reduction in all federal programs.  If  Social Security, Medicare and Medicaid are protected from spending cuts, then all domestic spending programs would have to be eliminated.  These include air traffic control, border control, water projects, and farm subsidies to name a few.

Balancing the federal budget solely through spending cuts could have significant economic and social consequences, such as reduced access to healthcare, education, and other vital services. Therefore, any plan to balance the federal budget should be carefully considered and balanced with measures to stimulate economic growth and increase revenue.