Protect Grandma and Mom – We Need to Discuss Entitlements

Good news: We are back to talking about our debt problem.

Bad news: Both sides agree that they don’t want to touch the entitlements. It might be politically useful to say that our debt problem can be solved with getting rid of government waste and taxing the rich, but no serious person believes this. There is no path to controlling the deficit that doesn’t include entitlements reform.

Nobody likes the rich nowadays. President Biden’s newly released budget makes that clear today. Everybody seems to be fine with taxing them. “In surveys conducted in 2013, 2015, 2016 and in July of this year, slim majorities approved of the idea of heavy taxes on the rich in order to redistribute wealth. The latest results are 52% approve, 47% disapprove.”

If you implemented the most extreme proposal offered by Senator Elizabeth Warren (D–MA), according to her own dubiously high estimates, this would generate $3.5 trillion over a decade. President Joe Biden claims that his plan would generate $1.5 trillion over the same period. Meanwhile, in that period, according to the Congressional Budget Office, the U.S. debt will grow by $19 trillion. So even the most ambitious proposal of taxing the rich won’t come anywhere close to solving the problem.

Nor does getting rid of government waste. There are two kinds of government spending. One is discretionary, or what Congress passes every year, and one is mandatory, which is what is spent by the U.S. government before a single vote is cast on the nation’s budget. Fiscal Year 2023 discretionary spending amounts to $1.7 trillion, and $900 billions of it is not related to the military. The projected deficit for this year is $1.4 trillion. So, if Congress didn’t spend a penny on anything that is not the military, we’d still have half a trillion dollars in deficit. So just cutting the waste is not going to bring us anywhere even close to solving the problem, either.

Because of entitlements. Social Security, Medicare, and Medicaid are what constitutes mandatory entitlements spending. According to the White House, this Fiscal Year, the U.S. government will spend $2.7 trillion on these three programs—the number reaches $3.7 trillion if you add other mandatory programs such as food stamps, earned income tax credit, and housing assistance, as well as the interest on national debt, which we keep increasing by taking in more debt. Here lies the problem: If the U.S. government collected taxes and spent nothing other than mandatory spending, we’d only barely manage to balance the budget.

Democrats who say that we don’t need to cut entitlements and only need to raise taxes on the rich are either lying or ignorant. Even the Washington Post, the bastion of progressivism, agrees. Without cutting spending, to fix the problem, the U.S. government will have to raise taxes on everyone, rich, middle class, and poor alike. Republicans also need to stop talking about cutting the waste. That won’t do it either. The answer lies in fixing mandatory spending.

But the good news is that the U.S. economy is still very strong, and our spending addiction has not caused serious problems … yet. So, we can gradually fix the problem with minimal pain over the next decade or so. But if we don’t, we could arrive at a crisis point that will require us to suddenly cut all spending, and it come with a lot of pain.

To give you a picture for what might happen, imagine the Great Depression and World War II at the same time. We will have to cut all entitlements altogether, and suddenly people who need social safety net to survive will be starving on the street, without food and housing. The elderly will lose all their benefits and either have to rely on their children to survive or will not survive at all. We will have to reduce the size of our military significantly, giving grounds to China and Russia to eat the world—and eventually us. Americans managed to eliminate elderly poverty, offer a generous safety net to the poor, and preserve world peace after World War II, and we could undo these all at once.

Fixing our debt problem is not easy, but it is simple. We don’t need to balance the budget next year, but only to arrest the growth in the size of the budget – maybe even caps -- while generating enough economic growth so the government’s income will grow faster than its expenditure. And this must include modest adjustments to Social Security and Medicare, as well as other programs.

When Social Security was enacted in 1935, Congress set the retirement age at 65. At the time, life expectancy was below 65. So, the law was affected under the understanding that most people would not reach that age. Nowadays, Americans easily live into their 80s, while we have raised the retirement age to 67. Medicare also has the same problem. Meanwhile, birthrates were much higher then, so there were more workers than retirees. The declining fertility rate has made this upside down, reducing the ratio of workers to retirees. Despite these changes, we haven’t adjusted our policies.

Last, at the time, most jobs were at factories and required a lot of physical labor that people in their 60s could not perform. This is not the case anymore. Working conditions have significantly improved since the 1930s. On the opposite side, the physical state of Americans has also improved, and an American in his or her 60s is much healthier physically to work than in the first half of the 20^th Century. If you don’t believe me, ask President Biden who believes that he can do the most difficult job in the world, President of the United States, up until 86.

This is not to say that we should be as extreme as 1935. The United States is a much richer country, and it can take care of its elderly and poor much better, and it should continue to do so. But to make sure that we can continue to do it ten years from now, we should fix our debt problem now.

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