How entitlements like Social Security and Medicare got so big
How entitlements like Social Security and Medicare got so big
The U.S. spends a lot of money every year — more than $6 trillion. Nearly half of those trillions go to just three programs: Social Security, Medicaid and Medicare. These are the biggest of the so-called government entitlements — benefits paid or given out to U.S. citizens and permanent residents. Today, entitlements are the biggest part of the federal budget by far. And as the debt debate comes around yet again, talk has resurfaced about cutting entitlements back or reducing the amount we spend on them. But cutting entitlements has historically been pretty tough.
“Entitlements are as old as the republic” said John Cogan, an economist at Stanford University’s Hoover Institution who specializes in fiscal policy and the U.S. budget.
Cogan said entitlements go back to one of the very first meetings of the very first U.S. Congress. “Go back to the very, very beginning, to 1789,” he said.
1789 is the very beginning. John Adams was in this Congress and the U.S. was barely a country. We didn’t have our own money yet, there were no income taxes, there was no national anthem. People used to sing a song called “Hail, Columbia” to celebrate the new republic (“Columbia” is an early name for the U.S., after Christopher Columbus).
Also, there was no Washington, D.C. In fact, the vote for the first entitlement took place in New York City. It’s where Congress passed the act to benefit Revolutionary War veterans.
“The program provided pensions to soldiers disabled as a result of injuries suffered during the Revolutionary War,” Cogan said. “As well as pensions to widows of soldiers that had been killed in battle.” The program was pretty tiny — roughly $5 a month went out to about 1,500 veterans, and the benefits would only pay out for one year.
That year was extended and the program was expanded to include more former soldiers; it was expanded again and again. Finally, in 1832, nearly 50 years after the entitlement was first created, Congress expanded it to include all Revolutionary War veterans, not just those who had been injured.
“All of a sudden, the applications started pouring in,” Cogan said. “Within a year, the number of people on the rolls tripled.” Costs had compounded too. Revolutionary War pensions ballooned to become 25% of the U.S. budget.
Cogan said this is a common trajectory for government benefits: They start small, targeting a very specific group of people, and then they grow.
“Individuals that are just outside of the eligibility rules — they’re close to qualifying, but don’t qualify — they start clamoring for the benefits,” Cogan said. “And then Congress eventually expands the program to cover them, and you get expansion after expansion after expansion.”
Cogan pointed to Social Security. It started during the Great Depression as a way to get money to elderly people, many of whom were living in poverty. It is now the biggest thing the U.S. government does by far. Tens of millions of people get checks every month, totaling nearly $1.5 trillion a year.
But that huge tab is not because the program has been expanded, said Louise Sheiner, an economist at The Brookings Institution specializing in fiscal and monetary policy.
“The reason these entitlements are growing isn’t because the benefits are getting richer, it’s because people are living longer,” Sheiner said. And that’s partially thanks to entitlements themselves. Sheiner pointed out that research has found again and again that entitlements help people — often the most vulnerable people — live longer, healthier, more productive lives. And, Sheiner said, those very real, measurable economic benefits are a big part of why entitlements tend to stick around.
“When you do programs that are actually good ideas, then you’re like, ‘Let’s not undo it,’” And we don’t have to, Sheiner said. The U.S. has the biggest economy in the world, and it’s not hurting for cash. The debt fight, she said, isn’t economic. “It’s about the politics. We can figure this out, but only when people are ready to give up something.”
But giving up an entitlement is not like any other compromise or budget cut, said economist John Cogan. Entitlement cuts feel personal.
“An entitlement program gives individuals a legal right to benefits,” Cogan said. “In a sense, you’re taking away a legal right when you cut an entitlement, and I think that’s what makes it so tough.”
Cogan said major entitlement cuts have only happened a handful of times in the country’s history. It’s far more common for programs to get bigger. Take Civil War pensions. Payouts began in 1862 to veterans and their families. That program grew to become nearly half of the budget at one point, and those payments went out for a long time. The last recipient of a Civil War pension check died in 2020. The check went to Irene Triplett, daughter of a Civil War veteran. She received a check for $73.13 every month until she passed away at age 90, more than 150 years after the end of the war.
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