Despite Unpopularity, Cuts to Medicare, Medicaid and Defense Are Necessary

COMMENTARY | Despite a ballooning deficit, a recent poll by the Washington Post and ABC revealed that Americans oppose many of the proposed cuts to the budget. From 2003 to 2008, the deficit ranged from 2 percent to 5 percent of GDP.

Since 2009, it has ballooned to 11 percent of GDP. S&P recently downgraded the long-term outlook of the U.S. government's credit rating from stable to negative based on the enormous deficit and the apparent inability of Congress to agree on a budget to address it.

According to a report issued by S&P, the primary reason for the downgrade was "the U.S.'s unfunded entitlement programs (Social Security, Medicare, and Medicaid)." These three programs account for unfunded liabilities of more than $106 trillion. To put this number in prospective, $106 trillion breaks down to $300,000 for every man, woman, and child in this country and is more than the value of every single bank account, stock certificate, building, and piece of property in the entire United States. In other words, these liabilities are unsustainable.

Unfortunately, the proposed budgets do not specifically address Social Security. However, there are proposed cuts to Medicare and Medicaid, which would begin to address these unfunded liabilities. Additionally, spending on the military, which has increased over the last decade, should be cut where appropriate. Here are three areas to look at:

Medicare

Costing more than $500 billion per year, Medicare consumes a significant proportion of the federal budget. Reform is necessary to reign in these costs. In fact, it is estimated that $48 billion, almost 10 percent of the total cost, is due to fraud and improper payments. The proposal to allow seniors to choose a private health insurer, who would then be reimbursed by the government, would allow the private sector to root out the unnecessary expenses and increase competition, decreasing the total cost.

Medicaid

Medicaid also consumes a large part of the federal budget and, like Medicare, must be reformed to lower costs. The Republican proposal would cut as much as $1 trillion. It also would give the states some flexibility with the program as the proposal calls for turning the Medicaid budget into block grants for the states. States would receive a set amount of funds and that would be it, as opposed to the current system where states are reimbursed a percentage of whatever is spent.

Military

Military spending has ballooned over the last decade, primarily due to multiple military endeavors in the Middle East and the constant risk of terrorist attack. Cuts in military spending are the same in the Republican and Obama budgets. Cutting $400 billion over the next 12 years is a small proportion of all military spending, but it is a necessary start.