March 30, 2017

CBO Report Shows 'Welfare' Isn't Driving Deficits

A new report from the Congressional Budget Office (CBO) found that non-health means-tested government programs, such as the Supplemental Nutrition Assistance Program (also known as food stamps) and Supplemental Security Income (SSI), are growing at a much slower rate than other federal benefit programs. The report analyzed both spending trends over the past decade and projections for the upcoming decade.

According to CBO, means-tested programs that provide benefits other than health care grew by 49 percent between 2007 and 2011, after adjusting for inflation. But since then, their costs have actually been falling and are projected to continue doing so over the next decade. That is despite the fact that gross domestic product is projected to grow by 37 percent between 2007 and 2027.

Non-means-tested programs, such as Social Security and Medicare, however, are projected to grow much faster than GDP. Between 2007 and 2027, the cost of these programs will double – even after adjusting for inflation.

There are two key reasons why these programs are growing faster than others in the federal budget. The first is demographic changes; while means-tested programs tend to serve wide swaths of the population, non-means-tested benefit programs are primarily concentrated on older Americans. As the baby boomer generation transitions into retirement, the costs of these programs grows.

The second factor is the rising cost of health care. The impact of this is evident in the difference between health-related and non-health means-tested programs. While the latter are projected to grow by 32 percent between 2007 and 2027, the former (which includes programs like Medicaid and the Children’s Health Insurance Program), are projected to grow by 169 percent.

There are two main takeaways from this report. The first is that we must get rising health care costs under control. When means-tested health programs are growing more than five times as fast as non-health programs that serve a similar population, it is abundantly clear what one of the main drivers of our nation’s fiscal challenges is.

The second key takeaway is that long-term fiscal sustainability need not be achieved on the backs of those who can least afford it. Policymakers can make needed fiscal reforms that neither make significant cuts for means-tested programs nor reduce benefits in non-means-tested programs for those who need them most.