Debt Ceiling Reality:

Debut of Made-in-China Social Security Checks

- Dr. Ileana Johnson Paugh
Friday, July 15, 2011

The total federal budget for 2012 is $3.68 trillion. The interest on debt is $242 billion. The rest constitutes mandatory and discretionary spending.

Discretionary spending refers to the budget appropriated each year. The discretionary budget is one third of the federal budget. Congress directly sets the level of discretionary spending ($1.24 trillion) and can choose to increase or decrease any programs.

In 2012, 57 percent of the federal discretionary budget will be national defense. The rest will include education, health programs, and housing assistance.

Mandatory spending ($2.44 trillion) includes entitlement programs, funded by eligibility rules or payment rules. Congress decides to create a program, determines who is eligible for the program, various criteria, and then estimates how much is appropriated for the program each year based on how many people will be eligible and will apply for benefits.

Social Security, Medicare, and Medicaid are the most costly entitlement programs. Veterans Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price supports are also included in entitlement programs.

Congress periodically reviews the eligibility rules and may change them in order to exclude or include more people.

Mandatory spending makes up about two-thirds of the total federal budget. The largest mandatory program is Social Security, about one-third of mandatory spending. As the age demographic of the country shifts towards an older population, mandatory spending increases.

The controversial national debt or public debt is $14 trillion to $100 trillion, depending on how many variables are considered. Nobody disputes the fact that, over the years, U.S. ran more deficits than surpluses because of recessions, inflation, sluggish growth, wars, oil price shocks, and a steady growth in entitlements.

Two American presidents are largely responsible for entitlements, Franklin D. Roosevelt and Lyndon B. Johnson with the “New Dealâ€