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Why the GOP must push for entitlement reform now
A rare consensus among all Americans gives Republicans a chance to put the nation on firmer financial footing
Edward Morrissey
Edward Morrissey
R

epublicans won an historic victory in the midterm elections, flipping more seats in the House than any election since 1938 and taking the gavel away from big-spending Speaker Nancy Pelosi. The wave of dissatisfaction was related directly to spending by Democrats during their control of Congress as well as the unpopular push for a new health-care entitlement program by President Barack Obama. Yet as House Republicans prepare to repeal the ObamaCare bill as promised during the election, some conservatives have voiced a curious reluctance to fight for entitlement reform.

It isn't difficult to understand why. Recall that George W. Bush insisted that he would use his political capital after the 2004 election to reform Social Security, the easier of the two massive entitlement programs to address. Despite clearly understood analyses showing that the system would start running deficits within the next 15 years — and that reform sooner would mean less expense — his political opponents demagogued the issue. Then-Senate Minority Leader Harry Reid insisted that there was no crisis in Social Security. His fellow Democrats accused Bush of trying to take away benefits from retirees through partial privatization, which would have allowed workers to control their own investment funds — and keep the money out of the hands of Congress.

Undeniably, the effort fell flat and damaged Bush in his second term, although not nearly as much as the failures with Hurricane Katrina and the rise of sectarian violence in Iraq did. But the attempts at Social Security reform happened at a time when anger over spending and deficits had not coalesced into a broad consensus. Unemployment in 2005 ranged from 5.4 percent in the beginning of the year to 4.9 percent by the end. Housing and bond markets were booming, heading for a bust that was still a few years away. And even though Republicans got punished for their free-spending ways in the 2006 elections, their final budget in 2007 had a deficit of only $244 billion, five times less than 2010’s $1.3 trillion. In short, the electorate didn’t see the need for a fundamental change to fiscal policy.

All that changed in 2010, thanks to the collapse of the housing bubble, high unemployment,and the obvious failure of huge Keynesian stimulus spending to correct the economic downturn. Recent polls by CBS and Reuters show that the public has reached an unprecedented level of consensus about reducing federal spending. In the CBS poll, 77 percent — including majorities of Democrats, Republicans, and Independents — favor spending cuts to solve the deficit, while only 9 percent favor tax hikes and another 9 percent want both. Reuters found 71 percent of its respondents, again with majorities in all three affiliation categories, opposed to raising the debt ceiling that would allow Treasury to sell more debt to finance federal operations.

This opportunity for spending cuts exists because Republicans made the case last year that the free-spending decades had put the United States in serious jeopardy of an economic collapse. Voters clearly responded to that argument — and now expect Congress to do something about it. A failure to attempt serious budget reductions will not just reduce credibility for the House majority, but will also dismantle the consensus that now exists for serious action.

Entitlement reform has to be part of any serious reform, especially if conservatives want to avoid deep cuts in defense spending. Mandatory spending combined with debt payments already comprise 63 percent of the proposed 2011 budget. Discretionary spending, which includes defense and Homeland Security, amounts to just over $1.4 trillion, with the rest going to debt service ($251 billion). The projected deficit comes to $1.267 trillion, which exceeds security outlays by almost 30 percent ($895 billion), and is more than twice the non-security discretionary budget ($520 billion).

Clearly we can't get to fiscal equilibrium by focusing on non-security discretionary spending. Even cutting the security budget in half and wiping out all other discretionary spending entirely only reduces the budget by $968 billion, which leaves a need to borrow another $300 billion for this budget year. The only way to get to a balanced budget in the short term is to seriously reduce mandatory spending. And that means Social Security ($730 billion), Medicare ($491 billion), and Medicaid ($297 billion).

The public has reached an unprecedented level of consensus about reducing federal spending.

Even apart from the budget crisis at hand now, any serious budgetary reform for the long term has to include restructuring entitlement programs. In six years, the White House projection for Social Security in 2011 shows outlays will increase 37 percent to just over a trillion dollars in 2017. Medicare outlays — assuming ObamaCare, mind you — will increase 64.8 percent in the same period, according to the same White House projections. Without serious structural changes in entitlement programs, mandatory spending combined with interest payments will comprise 72 percent of the 2017 budget, which increases from $3.834 trillion to $4.872 trillion. Waiting only makes the reforms more difficult and puts us deeper into the hole from which we must climb.

Republicans have a chance to lead on this issue with a rare consensus on spending reductions at their back. If they miss this opportunity and instead focus on small targets because the Obama administration and Senate Democrats don’t want to demonstrate leadership, the GOP may end up forfeiting its own claim to leadership, and an extraordinary opportunity to put this nation on much firmer footing.

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