An Insurance Company with an Army

With Republicans in control of the White House and Congress, Washington will soon be debating a new federal budget. House Speaker Paul Ryan and his congressional allies are widely expected to rein in federal spending. The Federal budget could use an overhaul, but Speaker Ryan has some terrible ideas about how to do it.

There’s a popular myth on the political right that most taxpayer dollars are being given away to the undeserving: either as foreign aid or welfare for lazy individuals who refuse to work. This  narrative is not supported by the facts. Foreign aid and welfare constitute less than 1 percent and 6 percent of the federal budget, respectively. Depending on how the budget is reimagined, slashing federal spending could undermine our economic growth and weaken programs on which most Americans will depend for healthcare and retirement income.


Peter Fisher, former undersecretary of the Treasury, once quipped that our government is little more than an insurance company with an army. He was not wrong. 47 percent of the government’s budget is devoted to social insurance programs (Medicare, Medicaid and Social Security). Another 16 percent is consumed by the military. This isn’t inherently bad; much of our social insurance spending provides income and health care for the elderly. But there is a problematic trend within these numbers. Our government invests far less in our future than it has in the past. As a percentage of our economy, federal funding for research and development (R&D) is only half of what it was in 1964. Our investment in roads, bridges and other infrastructures fell so much that the Army Corps of Engineers gave America a D+ in its most recent report. The U.S. also under-invests in human capital: American students’ test scores have fallen behind much of the developed world. While our collective investment in our future has declined, federal spending is increasingly dominated by consumption of services in the present, especially healthcare. We spend more on healthcare than peer nations, many of which control healthcare costs by having regulators set prices. These are just some of the issues Congress must address.


Speaker Ryan and his congressional Republicans championed two major ideas to cut federal spending. The first is to convert Medicare and Medicaid into premium support and block grant programs, respectively. This isn’t a solution to growing health costs; it’s a plan to force other people to come up with a solution. Rather than providing seniors with health insurance, Medicare would provide seniors with money to buy private insurance. This saves the federal government money because Speaker Ryan would give less money to seniors than Medicare currently spends to insure them. As the cost of private insurance grows, seniors will bear more of the cost or be forced to buy skimpier coverage. Similarly, block-granting Medicaid would cap federal funding for state governments, causing federal support to fall even further behind the cost of healthcare. In both cases, the federal government would do nothing to address runaway costs in the healthcare sector; it would simply shift the costs onto state governments and senior citizens. This would not be an improvement over the current situation.


Speaker Ryan’s second idea is to make draconian cuts in nondefense discretionary spending. This category constitutes just 16 percent of the federal budget, but encompasses everything from meat inspectors to the federal highway system. It includes the National Institutes for Health, the National Science Foundation, the Department of Education, the Centers for Disease Control and many others. These agencies fund R&D, our nation’s infrastructure and the education of our youth. In short, this sliver of our budget is devoted to investing in our future. This category of spending is small, and it’s not growing, so slashing it will not resolve our budget quagmire. But this plan would have devastating consequences. Gutting non-defense discretionary spending is one of the most foolish, shortsighted and ineffective ideas for trimming the budget.


Right now, our government under-invests in our infrastructure, our people and our future. Meanwhile, it writes a blank check to our private healthcare sector. Instead of pushing these problems onto state governments and senior citizens, Congress should roll up its sleeves and directly address rising healthcare costs. Republicans should embrace funding for R&D, education and infrastructure as crucial investments in our future. America doesn’t need our government to do less; we need it to do better.


Joshua Lewis is a Laney Graduate School student from Athens, Georgia.