What does it mean when people say that some federal programs’ budgets are difficult to adjust because they’re on automatic pilot? N.C. State University economist Mike Walden explains.
“Well, this means … there are some federal programs where the law is written that says that anyone who qualifies gets the program — gets to use the program. And so the funding and spending of the program is … pushed by how many people qualify.
“An excellent example is Medicare. Medicare is a big, big program in the federal budget. It’s been growing rapidly. And it’s growing rapidly because of two things; of course, medical costs are going up, but also the number of people who qualify the baby boomers who are retiring. Ten thousand of those baby boomers retire every year — I’m sorry, every day — and qualify for Medicare.
“So, what these automatic pilot programs mean is it’s very difficult, for example, some propose to say, ‘You know what, let’s just at the federal level free spending, not spending more than we did last year.’
“Well, the problem is if you’ve got 10,000 new people qualifying for a program every day to do to freeze that program, you’d have to say, ‘Well, you’re not going to be able to take part in the program. You’re not going to be able to take part in Social Security or Medicare or Medicaid,’ which are the three programs that really operate on automatic pilot.
“What this really means … is to really adjust and deal with our future federal fiscal issues, we have to look for a closely at these three programs.”