Is the U.S. Government Just a Large Insurance Provider?

What is does the U.S. government actually do? Ezra Klein has an answer. Klein says that when you look at what the U.S. government spends its money on, it’s clear that its real business is to provide insurance. In fact, he says, the U.S. government is really just “an insurance conglomerate protected by a large standing army.”


More than 40% of the money the government spends goes to some form of social insurance—that is, to Social Security, Medicare, or Medicaid. Another nearly 25% of our the money we spend goes to fund the military. Add in the 6.5% we spend to service our national debt, and less than 30% of what we spend goes to anything else. And, as Klein points out, some of that remaining 30% or so pays for things like unemployment insurance and food stamps that are also effectively forms of social insurance.

For all the outrage about health-care bill, just about no one is serious talking about changing the government’s role as our national insurance provider. A few—like Sen. Rand Paul (R-KY) and Rep. Paul Ryan (R-WI)—have at times proposed cuts to Social Security and Medicare. But most politicians of both parties shy away from suggesting we trim those programs, because polls show again and again that doing so would be politically extremely unpopular. Don’t tell anyone, Digby says, but the name for a government that provides social insurance is a “welfare state.” And Americans like it, even if they don’t like that term.

When the talk about cutting the budget, both parties focus on domestic discretionary spending, which accounts for just over 12% of the budget. They squabble over tiny line items, like funding for public broadcasting. But in the budgetary big picture, whether or not we fund NPR is hardly an important issue. Politicians focus on issues like this because it is politically less dangerous to do so. As Klein says,

Politicians don’t take the axe to non-defense discretionary spending because they think Teach for America or the food safety infrastructure—both of which Republicans are proposing to cut dramatically—is more wasteful than the Pentagon or the health-care system. They do it because Teach for America and the food safety system is less politically powerful than the Pentagon or Medicare beneficiaries.

In fact, making any real cuts in the budget at all is politically unpopular. Klein cites a recent Pew poll that shows that Americans say they only want to reduce spending on unemployment insurance and foreign aid—each of which account for just a tiny fraction of total government spending. The truth is that, as Klein says, if any government program was really unpopular we would have cut it already.

Should the government be in the insurance business? To some extent, it certainly should. Providing social insurance that protects people from political and economic events beyond their control is essential to ensuring an an equitable, functioning advanced economy. It’s absurd to suggest that social programs represent some kind of new socialist takeover of the U.S. government. Providing social insurance is most of what the government already does, and most of what it has done for a long time.

But it’s not at all clear that the government should be spending what it does they way it does on social insurance programs. Any serious examination of our budget or our fiscal priorities has to start with Social Security, Medicare, and Medicaid (as well as with defense spending). And that means facing up to what we’re really spending our money on, and beginning to wean ourselves of the some of the entitlement benefits we’ve grown addicted to.

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