The country is in the midst of talking about reform; Medicare reform, healthcare reform, Social Security reform, and in general, entitlement reform.

What exactly is an entitlement? An entitlement is a guarantee of access to benefits based on established rights or by legislation. The ones we are most familiar with are Social Security, Medicare and Medicaid.

For fiscal year 2010, Social Security and Social insurance taxes contributed $865 billion or 40% of the $2.162 trillion government income. Individual income taxes contributed $899 billion or 42% of the government’s income.

For fiscal year 2010, Social Security payments amounted to $701 billion or 20% of the $3.456 trillion government expenses. Medicare and Medicaid accounted for $793 billion or 23% of the government’s expenses while other mandatory expenses accounted for $416 billion or 12% of the government’s expenses. The total expenditure for entitlements was about $1.9 trillion.

Using simple math, the government took in nearly $1.3 trillion less than it spent.

As people live longer, the number of workers supporting the number of retirees continues to decline, especially as the baby boomers (born 1946 to 1964) attain retirement age and nearly double from 2010 to 2030.

So how do we fix this?

The ways of fixing it would be different under a king or dictator than under a democracy. Insulting the electorate in a democracy is the surest way to the exit door for elected officials so they are trying very hard to solve the problem without being associated with an unpopular view.

Democrats believed that the economic crisis made the electorate want security so they created large public programs, like the stimulus bill to save the economy, the healthcare law where all will be covered, and other expansions of government programs.

Republicans capitalized on runaway government and its runaway debt, and they ran for office on the promises of stopping the economic bleeding and reversing the spending binge.

The common problem is how to cut government spending while growing the economy. The national debt as of December 2010 is roughly $14 trillion.

Looking at the sheer size and potential horror of the problem causes many of us to freeze like a deer in the headlights.

What is the horror? What if the government was forced to cancel all entitlement programs because it didn’t have the money? The annual savings would be roughly the $1.9 trillion less the $865 billion which would no longer be returned as taxes, but instead millions of people would be left homeless, unable to pay either mortgage or rent, exploding public housing and collapsing the real estate market, making the most recent one look trivial. Millions of people would be left without paid medical care, forcing an explosion of federal medical facilities. Millions would be without money for food, exploding the use of federal food stamps and other assistance. So much for the $1.9 trillion which would be spent on these assisted programs and would make us not only a socialist state but a welfare state.

We all know entitlements must be reformed (as long as they don’t cut any of my benefits), and therein lies the problem.

Entitlement cutting is enormously unpopular with voters. But voters want real action to restrain spending, and entitlements are the only place that will make any real difference.

So what to do?

Republicans have come up with a strategy that will leave entitlements alone for seniors, at a cost to younger workers. Medicare would be transformed into a system of vouchers that would be used to pay for approved insurance coverage. The system would provide roughly the same coverage as for Medicare seniors, and would cause Medicare costs to grow more slowly and hopefully make consumers more cost conscious. Over time, such reform would yield enormous savings.

It is only a single step of cutting back now to help our grandchildren.

But will the voters go for it?

The legislation provides $10 billion to state school districts, to rehire and save 300,000 state employee jobs, more than half of them (160,000) teaching jobs. 

The remaining $16 billion will help states pay their share of Medicaid, public health for the very poor.  State budgets have been decimated during this recession as Medicaid costs have soared. 

Analysts say the latest cash infusion is essential to preserving the fragile economic recovery.  The last thing our current economy needs is more people out of work.

States are experiencing the largest revenue drop that they’ve ever faced.  This rescue package contains funds that must be spent rehiring teachers and sustaining state payrolls. 

This funding is fully paid for from closing a business tax loophole and will not add to the federal deficit.  As reported by the nonpartisan Congressional Budget Office, it will actually lower the deficit over the next 10 years.

The Senate approved this critical funding by a vote of 61-39 on August 5, 2010, with only two Republicans (Senators Olympia Snowe and Susan Collins, both of Maine) breaking with party orders to vote in favor of saving teacher jobs.

Considering the impending school year start, Nancy Pelosi,(D-CA) Speaker of the House of Representatives, called House members back from their August recess to vote on the measures approved by the Senate. The bill passed 247-161 on August 10, 2010, with only two Republicans (Michel Castle (R-DE) and Anh Cao (R-LA)) in favor of saving teacher jobs.

The fast track passing of this bill will allow the U.S. Department of Education to begin distributing this funding to the states’ governors by September using a formula based on population.

A chart was created by The Center for Budget Policy and Priority showing the funding each state is expected to receive for both education stabilization and Federal Medical Assistance Percentage (FMAP) for Medicaid.

Republicans are not happy about the federal funding.  Some governors are reluctant to accept the money because federal conditions stipulate using the funding for education only and they want the money for other programs.  

Wisconsin Democratic Governor Jim Doyle, welcomed the stimulus money to his state to handle the urgent needs states and residents have right now.  “We cannot ask a second-grader to come back and complete their studies five years from now when the economy has turned around,” … “The education we provide now will be the strength of our state and nation for decades to come.”