Avoiding the Obvious Solution to Entitlements

Posted: Feb 02, 2012 12:01 AM

Imagine you are a Member of Congress deeply troubled by the huge federal deficits.  You would likely be fully aware that unless serious reform happens soon, the existing major entitlement programs will eventually consume the entire federal tax revenue. 

Now, imagine learning that one simple reform could provide the following results:

    • Reduce outlays by $380 billion in the first 10 years
    • Cut public debt by 20% within 25 years, by one-third within 30 years, and maybe as much as 80% with 50 years.
    • Increase the GDP by 1%, or $150 billion per year, and a cumulative $13 trillion over the next three decades.

You might be thinking that this would be the easiest piece of legislation to sponsor and pass on Capitol Hill – but, you would be wrong.

Yesterday we published A Nation of Dependents focusing on the dramatic increase in both the amount and distribution across the population of various government benefit programs.  We also noted that while Americans generally believe that federal deficits need to be brought under control, few are willing to reform major entitlements like Social Security and Medicare to help reduce over spending and balance the federal budget.

The above scenario is outlined in a Washington Times feature based on just one change to Social Security and Medicare:  gradually increasing the retirement age from 67 to 70 for Social Security benefits and from 65 to 67 for Medicare.   The projections for savings are based on analysis of by the Congressional Budget Office, the Committee for Responsible Budget Reform, and the McKinsey Global Institute.  

Life expectancy has increased by about 15 years for both men and women since Social Security was first implemented; by eight years since Medicare was adopted.  And there is abundant evidence that Americans want to work longer, be productive citizens, and continue to earn – but, they also don’t want to sacrifice government benefits.  Just 24% are willing to consider a cut in Social Security and only 16% for Medicare according to recent public opinion polling. 

Politicians know that pledges to “preserve and protect” Social Security and Medicare win them votes as well as campaign contributions.  Conversely, even a hint of reforming the entitlement programs is red-meat ammunition for any candidate’s opponent, and sure to bring out the pitchforks with the electorate.  

Increasing the eligibility age was also supported by the Simpson-Bowles deficit reduction commission appointed by President Obama.  Political leaders from both parties at times have intimated a willingness to support a gradual increase in the eligibility age, but serious proposals never seem to gain legislative traction.  As the Washington Times said, “few politicians today will even touch it.”

That analysis is consistent with this former Member of Congress’s personal experience.  The arithmetic isn’t that complicated.  Democrats and Republicans have known for a long time how to fix the entitlements to make them financially sustainable and reduce the burden of growing debt.   But, politicians are in to self-preservation.  They like to keep their jobs.  So, until the electorate is willing to support entitlement reforms to reduce deficits spending, don’t look for Congress to really get serious about doing it either.