Congress is in the thick of budget season, determining how the federal government will spend dollars both borrowed and taxed. A big part of total federal spending is for entitlement programs. With the House of Representatives now controlled by Democrats and the Senate and presidency controlled by Republicans, we may see a more contentious budget process than we have seen in the past two years. Entitlement programs make up a large portion of federal spending. That means there may be a spirited discussion about the future of programs such as Medicaid, Medicare, or Social Security.
What’s A Federal Entitlement?
The Office of Management and Budget defines an entitlement program as “a program in which the Federal Government is legally obligated to make payments or provide aid to any person who, or State or local government that, meets the legal criteria for eligibility.”
In other words, if someone meets certain conditions, that person can receive benefits from a federal entitlement program. This could be a program like Social Security, which has an age qualification and a requirement to have paid into the program, or Medicaid, which requires a medical condition and a low income to qualify for benefits.
Here are some of the major entitlement programs:
- Social Security
- Supplemental Nutrition Assistance Program (SNAP)
- Supplemental Security Income
- Unemployment compensation
- Federal and civilian employee retirement benefits
- Veterans’ benefits
- Children’s Health Insurance Program
- Student loans
- Deposit insurance
The design of these programs also create a legal obligation on the federal government to provide benefits to everyone who qualifies. If someone is turned down but still thinks that he or she meets the qualifications outlined in the law, that person can go to court to obtain the benefit. This does not mean that the federal government cannot change eligibility or even end entitlement programs, but such changes must happen through the legislative process.
How Entitlement Programs Are Funded
As discussed in another Deep Dive, many government programs are funded by the appropriations process. Every year, Congress passes and the president signs spending bills that pay for federal government operations. Appropriated entitlements are funded through this process. These include Medicaid and some veterans’ programs.
Most entitlement programs are funded through mandatory spending, however. This is when the law authorizing the program sets the spending for the program on an ongoing basis. Programs authorized in such ways do not have to go through the yearly spending process, and continue to operate even when there are government shutdowns.
While there are some entitlement programs that are funded through the appropriations process, and there are some non-entitlement programs that are funded through mandatory spending, in general mandatory spending is used for entitlement programs.
To pay for this spending, Congress and the president can raise taxes or borrow money. If they want to slow down spending increases for entitlement programs, they could also change the eligibility requirements. That would reduce the amount of money being spent every year on these programs. Some of these options include raising the age at which someone could receive Medicare or Social Security, reducing the benefits offered by Medicaid, adjusting how the inflation increase for federal retirement benefits is calculated.
What This Means for You
As discussed in a previous Deep Dive, the federal budget deficit is growing. It is expected to continue growing substantially in the future as federal spending rises. The Congressional Budget Office projects that mandatory spending for entitlement programs is a large part of this projected spending growth.
The projected growth of the deficit will mean, at some point in the future, that Congress and the president will face hard choices about what to do regarding entitlement programs. If enacted, these changes would affect current people who receive benefits from these programs or those who are anticipating receiving benefits.