Liberals should lead entitlement reform
If liberals succeed in blocking any serious entitlement reform during the Obama presidency, as seems increasingly likely, they will have handed conservatives a gift.
One number explains why: 2.7 percent.
That is the share of the national economy that, according to Congressional Budget Office projections, government will spend on nondefense discretionary programs 10 years from now. By comparison, this year the country will spend about 4 percent of its gross domestic product on these programs — a percentage that has held constant over the past half-century.
Nondefense discretionary spending is pretty much everything the government does once it has paid for the military, Social Security and health programs. It’s Head Start, PBS, national parks, President Barack Obama’s dream of universal pre-K education, Meals on Wheels, Pell grants to help poor high school graduates go to college, Alzheimer’s research, solar power experiments, subsidies for high-speed rail, drug safety — the list is almost endless.
We are on a path to reduce by one-third the share of the economy devoted to active government, to investments in the future, to education and science. What could make the right wing happier?
This spending is projected to decrease in part because Congress won’t raise enough revenue. Most Republicans oppose any tax increases. Democrats will support tax hikes on the wealthy, as they did at the beginning of this year, and they claim — as do some Republicans — to support “closing loopholes.”
In practice, though, the largest exemptions are tax deductions that voters treasure — like those for mortgage interest and charitable giving — and so neither party wants to touch them. One of the biggest “loopholes” is the deduction for state and local taxes, which benefits blue states most. That helps explain why an across-the-board limit on deductions that Obama has sensibly proposed, year after year, has died a quick and unremarked death in Congress, year after year.
But there’s another reason for the squeeze on liberal-favored programs: the inexorable growth in entitlement spending as health care costs grow and the population ages. Mandatory spending will reach 14 percent of GDP by 2022, compared with an average of 10.2 percent over the past 40 years. Social Security, Medicare and the other major health care programs will account for more than half of all federal spending 10 years from now, CBO says. That takes into account the recent good news of slower-than-expected growth in health care costs, and it assumes Medicare cuts that are unlikely to be implemented.
The guts of these programs have to be preserved, as liberals rightly argue. Social Security keeps the elderly out of poverty. Medicare ensures that they get health care, and Medicaid and Obamacare should come close to extending that promise to all Americans.
But while federal programs aimed at the young and the poor — and at investments in the future — are slated to dwindle, the entitlement programs are on track to give ever richer benefits to a growing older generation, some of whom don’t need all that much help.
Social Security, for example, is designed not just to provide a floor for all seniors but to give each succeeding generation more generous benefits than the one before. That’s a nice idea but one the country can no longer afford, at least not without robbing the future. That’s why Obama proposed changes to the Social Security cost-of-living index, designed to protect the vulnerable.
His party rebelled. “Tell the President,” Rep. Ed Markey said in a fundraising letter for his Massachusetts Senate campaign. “No Social Security cuts. No exceptions.” The liberal Center for American Progress denounced the president’s modest entitlement reforms as “enormous concessions without any promise whatsoever from the president’s political adversaries that they will reciprocate.”
CAP argues that the country faces many problems as or more important than the fiscal deficit, and I agree. Income and wealth inequality, slow economic growth, persistent joblessness, crumbling infrastructure, terrible inner-city schools — these all cry out for creative policy.
But they all will also be hard to address as long as government resources tilt more and more toward the older, often better-off generation.
The rational progressive policy would be to support entitlement reform while there is a progressive in the White House to ensure the most vulnerable recipients are not harmed.
Otherwise, liberals can pat themselves on the back for “saving Social Security” as less and less money flows to other programs that they prize. Small-government conservatives won’t have to do anything but stand aside and applaud.