Entitlement programs: A Glossary of Political Economy Terms – Dr. Paul M. Johnson
The kind of government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right(enforceable in court, if necessary) whenever they meet eligibility conditions that are specified by the standing law that authorizes the program. The beneficiaries of entitlement programs are normally individual citizens or residents, but sometimes organizations such as business corporations, local governments, or even political parties may have similar special “entitlements” under certain programs. The most important examples of entitlement programs at the federal level in the United States would include Social Security, Medicare, and Medicaid, most Veterans’ Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs.
The existence of entitlement programs is mainly significant from a political economy standpoint because of the very difficult problems they create for Congress’s efforts to control the exact size of the budget deficit or surplus through the annual appropriations process. It is often very hard to predict in advance just how many individuals will meet the various entitlement criteria during any given year, so it is therefore difficult to predict what the total costs to the government will be at the time the appropriation bills for the coming fiscal year are being drafted. This makes it even harder for government to smooth out the business cycle or pursue other macroeconomic objectives through an active fiscal policy – because these objectives require careful pre-planning of the size of the budget deficit or surplus to be run. In the first place, the amount of money that will be required in the coming year to fund an entitlement program is often extremely difficult to predict in advance because the number of people with an entitlement may depend upon the overall condition of the economy at the time. For example, the total amount of unemployment benefits to be paid out will depend upon the changing level of unemployment in the economy as the year wears on. Some very large entitlement programs (including Social Security pensions and government employee retirement programs) have been “indexed” to inflation, so that the size of the benefit is periodically adjusted according to a fixed formula based on unpredictable changes in the Consumers’ Price Index. Perhaps more significantly, the amount of spending on entitlement programs is impossible for the Senate and House Appropriations committees to even attempt to adjust or to control because those committees do not have the jurisdiction to rewrite the laws that specify who gets how much and under what conditions. The various specialized standing committees who do have the jurisdiction to rewrite authorizing legislation each tend to be dominated by members whose political interests lie in expanding their particular entitlement program, not in cutting it back, and the political influence of the organized special interest groups that support the programs tends to be overwhelming on the specialized committees when such proposals arise.
Since the middle 1980s, entitlement programs have accounted for more than half of all federal spending. Taken together with such other almost uncontrollable (in the short run, that is) expenses as interest payments on the national debt and the payment obligations arising from long-term contracts already entered into by the government in past years, entitlement programs leave Congress with no more than about 25% of the annual budget to be scrutinized for possible cutbacks through the regular appropriations process. This very substantially reduces the practicality of trying to counteract the ups and downs of the overall economy through a “discretionary” fiscal policy because so very little of the budget is available for meaningful alteration by the Appropriations and Budget committees on short notice.