Government Spending in the United States
Entitlements Control
Everyone agrees that government spending on medical care and social security has been on a trajectory so that it could well become a major drag on the United States’ economy. The Affordable Care Act (Obama Care) was supposed to slow down entitlement growth, but it is far from clear at this point how it will accomplish this since spending on Medicaid will expand significantly. I concentrate my discussion of entitlements on spending on the elderly, and propose ways to reduce this spending without any significant additional rationing of care.
Estimates of future spending on Medicare, the main government program for medical spending on persons over 65, indicate that it will rise by 2035 from its present level of about 3% of GDP to almost 6%. This is a ballpark estimate, and it makes assumptions about the growth over time in the number of persons of different ages who will be over 65, medical spending at different ages for those over 65, and the rate of growth of GDP over this time period. The growth in the number of persons over age 65 is the only one of these quantities that can be forecast reasonably accurately.
Despite this uncertainty about what actual spending will be, I have a couple of suggestions to slowdown the growth of Medicare spending. The first one is the easiest in principle to implement; namely to raise the age of eligibility for Medicare (and for social security as well) to age 70. Social security was introduced in the 1930s when life expectancy at age 65 was more than seven years below what it is now. Moreover, the quality of life after age 65 was also much lower at that time since men and women were generally already “old” at age 65. Although Medicare was not introduced until the late 1960s, both the quality and quantity of life have also increased rapidly since then- for example, life expectancy at age 65 has risen by five years.
The more numerous and healthier men and women currently who reach age 65 should be encouraged to continue working for at least several more years- probably to age 70- instead of being encouraged to retire to collect social security benefits and Medicare payments. Those between ages 65-70 would remain in employer’s health insurance plans or buy individual insurance. In either case, they would have greater incentive to economize on their health spending.
Exceptions to the 70 eligibility age would be made for men and women who are not healthy enough to continue working after 65. At present, individuals can stop working and collect disability insurance if they can “prove” they have work-related disabilities. Workers between 65 and 70 could be folded into this disability program, and a corresponding one for Medicare eligibility, with suitable modifications to speed up the disability litigation process, and to reduce the complexity of the decisions on whether someone qualifies for disability payments.
The other main reform to Medicare is to put a larger share of medical payments onto individuals who have sufficient resources. A simple approach would be to introduce vouchers for Medicare spending, whereby lower income and wealth individuals would receive full vouchers to cover their Medicare expenses. Families with higher incomes and wealth would receive partial vouchers, with the voucher rate falling as incomes and wealth became higher. Families with partial vouchers presumably would generally purchase private health insurance to fill in gaps in their Medicare coverage.
Many of those purchasing this private “supplementary” health insurance would take sizable deductions and significant co-pays to reduce the size of their insurance premiums. These deductions and co-pays would increase the incentives of the elderly to economize on medical spending since marginal health spending will come partially or wholly out of their own pockets.
Author: Becker, defunct
Executive Order 13589
Executive Order in relation with Promoting Efficient Spending (November 09, 2011):
“By the authority vested in me as President by the Constitution and the laws of the United States of America, and in order to further promote efficient spending in the Federal Government, it is hereby ordered as follows:
Section 1. Policy. My Administration is committed to cutting waste in Federal Government spending and identifying opportunities to promote efficient and effective spending. The Federal Government performs critical functions that support the basic protections that Americans have counted on for decades. As they serve taxpayers, executive departments and agencies (agencies) also must act in a fiscally responsible manner, including by minimizing their costs, in order to perform these mission critical functions in the most efficient, cost effective way. As such, I have pursued an aggressive agenda for reducing administrative costs since taking office and, most recently, within my Fiscal Year 2012 Budget. Building on this effort, I direct agency heads to take even more aggressive steps to ensure the Government is a good steward of taxpayer money.
Sec. 2. Agency Reduction Targets. Each agency shall establish a plan for reducing the combined costs associated with the activities covered by sections 3 through 7 of this order, as well as activities included in the Administrative Efficiency Initiative in the Fiscal Year 2012 Budget, by not less than 20 percent below Fiscal Year 2010 levels, in Fiscal Year 2013. Agency plans for meeting this target shall be submitted to the Office of Management and Budget (OMB) within 45 days of the date of this order. The OMB shall monitor implementation of these plans consistent with Executive Order 13576 of June 13, 2011 (Delivering an Efficient, Effective, and Accountable Government).
Sec. 3. Travel. (a) Agency travel is important to the effective functioning of Government and certain activities can be performed only by traveling to a different location. However, to ensure efficient travel spending, agencies are encouraged to devise strategic alternatives to Government travel, including local or technological alternatives, such as teleconferencing and video conferencing. Agencies should make all appropriate efforts to conduct business and host or sponsor conferences in space controlled by the Federal Government, wherever practicable and cost effective. Lastly, each agency should review its policies associated with domestic civilian permanent change of duty station travel (relocations), including eligibility rules, to identify ways to reduce costs and ensure appropriate controls are in place.
(b) Each agency, agency component, and office of inspector general should designate a senior level official to be responsible for developing and implementing policies and controls to ensure efficient spending on travel and conference related activities, consistent with subsection (a) of this section.
Sec. 4. Employee Information Technology Devices. Agencies should assess current device inventories and usage, and establish controls, to ensure that they are not paying for unused or underutilized information technology (IT) equipment, installed software, or services. Each agency should take steps to limit the number of IT devices (e.g., mobile phones, smartphones, desktop and laptop computers, and tablet personal computers) issued to employees, consistent with the Telework Enhancement Act of 2010 (Public Law 111 292), operational requirements (including continuity of operations), and initiatives designed to create efficiency through the effective implementation of technology. To promote further efficiencies in IT, agencies should consider the implementation of appropriate agency-wide IT solutions that consolidate activities such as desktop services, email, and collaboration tools.
Sec. 5. Printing. Agencies are encouraged to limit the publication and printing of hard copy documents and to presume that information should be provided in an electronic form, whenever practicable, permitted by law, and consistent with applicable records retention requirements. Agencies should consider using acquisition vehicles developed by the OMB’s Federal Strategic Sourcing Initiative to acquire printing and copying devices and services.
Sec. 6. Executive Fleet Efficiencies. The President’s Memorandum of May 24, 2011 (Federal Fleet Performance) directed agencies to improve the performance of the Federal fleet of motor vehicles by increasing the use of vehicle technologies, optimizing fleet size, and improving agency fleet management. Building upon this effort, agencies should limit executive transportation.
Sec. 7. Extraneous Promotional Items. Agencies should limit the purchase of promotional items (e.g., plaques, clothing, and commemorative items), in particular where they are not cost-effective.”
Other Popular Tax Concepts
- Federal Income Tax Law (sometimes, including Government Spending)
- Tax Code (sometimes, including Government Spending)
- Income Tax (sometimes, including Government Spending)
- Tax Law Careers (sometimes, including Government Spending)
- Tax Law Jobs (sometimes, including Government Spending)
- Income Tax Law (sometimes, including Government Spending)
- Taxation (sometimes, including Government Spending)
- Taxation without representation (sometimes, including Government Spending)
- Types of Taxation (sometimes, including Government Spending)
Leave a Reply