Yesterday I posted an analysis that refuted the notion, common among conservatives, that the federal budget is out of control and growing a rapid rate. Instead, I demonstrated that government spending as a percentage of GDP maxed out in the early 1980s and has been declining slowly on average ever since.

Today, I will address a variant of this argument that focuses on spending on social program, including Medicaid, Medicare, and Social Security. My argument is simple: We don’t have a crisis of entitlements or social programs, we have, very narrowly, a health care crisis. Non health-related social spending — entitlements, Social Security, welfare, etc — is actually declining as a percentage of GDP since 1980.

But first, the scary chart. This is spending on defense and non-defense as a percentage of GDP since 1950:

I trust you can see why someone looking at this chart might come to dire conclusions about the rapid growth of non-defense spending, perhaps at the expense of military preparedness. But, as with my analysis from yesterday, it pays to divide things into pre-Reagan and post-Reagan. Look at the same chart, but only including trends since 1980:

Clearly, you can see that things have largely stabilized. Indeed, non-defense spending has dropped off slightly as a percentage of GDP since 1980, though defense spending has dropped even faster. The end of the Cold War, of course, accounts for most of this, though defense spending as a percentage of GDP dropped from 1985 until 2001 largely unabated.

But non-defense spending includes all sort of things like interest payments on the national debt, investments in physical infrastructure, payoffs to agribusiness. So, it is worthwhile to look at just traditional social spending — listed under the federal budget tables as a “supercategory” called spending on “human resources.” There is something of a mixed bag here, but it is mostly direct transfer payments as well as health care. Again, I’ll post two charts: 1950 to present and 1980 to present:

As you can see again, the trend is much less scary since 1980. But in fairness, this is still a pretty consistent increase, with “human resource” spending increasing from around 11% of GDP to 13% in under 30 years. The pace of growth is significant enough to warrant concern I think.

But what makes up this increase in social programs? Well, the issue becomes a little more complicated now. The existing government spreadsheets contain all the numbers that generated the graphs in yesterday’s post and the ones above. But if we want to break down “human resource” spending into subcategories, we need to do a little manipulation of the data. The spreadsheets are broken down by subfunction listing outlays by every subfunction, so separate breakdown for Medicare, Medicaid, etc. So, to find healthcare spending, I took Medicare and Medicaid divided it by total outlays for a given year and then multiplied that number by the total government outlays as a percentage of GDP. In that way, I converted raw outlays into outlays by category as a percentage of GDP. Simple math, but I wanted to explain since for the rest of this post, I am using calculated numbers, not simple transposition of data in existing spreadsheets.

Anyway, here is a chart showing social spending minus health care spending since 1980:

So, non-health care social spending — entitlements, Social Security, welfare, etc — is actually declining as a percentage of GDP since 1980. You get small upticks at recessions, but the long-term secular trend is decline. Why? Because, we’ve been eliminating and reforming these programs faster than creating them. Traditional welfare — Aid to Families with Dependent Children (AFDC) — is a prime example. It was eliminated in 1996 and replaced with Temporary Assistance to Needy Families (TANF). It is now capped, there are work requirements, etc. All good policy changes, and they have had a clear effect. Despite the conservative mantra that no government program once created is ever eliminated, here is a case of a dramatic reduction and reform of a major program. It was not wholly eliminated, but welfare rolls have declined by some 60% by some estimates.

So, if social program on the whole are declining, why is the overall spending on “human resources” increasing at a worrisome pace. Simple answer: health care. Look at the slope since 1962 and note that it is the same slope post 1980. Health care spending was immune to the Reagan revolution, which otherwise halted and reversed the growth of federal spending:

We face a health care crisis today, not a crisis in social programs or in federal spending overall. Our problems are almost wholly a function of exploding health care costs.

Tomorrow, I’ll provide a more in-depth analysis of Social Security and explain why the so-called “actuarial” gap is dramatically overstated. But Social Security deserves its own post. I’ll deal with the defense security piece after that. After all the budget analysis is done, I’ll return to health care to provide a few thoughts on fixing the situation.