If Republicans Won’t Confront Entitlements, Who Will?

(Bloomberg Opinion) -- If the GOP doesn't address the rising costs of middle-class entitlement programs, then who will?

The National Republican Campaign Committee is running an ad warning voters that Democrats will cut Medicare. The ad tells workers that from their paychecks “the government withheld your money to pay for your Medicare,” and characterized “DC liberals” as “raiding our Medicare.” “That money,” the ad argues, “belongs to you.”

This campaign-season rhetoric stands in sharp contrast to Republicans' general approach to entitlements. The party's elected leaders have traditionally advocated changing the way the programs are structured and reducing their projected spending.

How to explain this contrast in GOP messages? A lot of it is simple politics.

After all, even Mitt Romney and Paul Ryan in their 2012 presidential campaign presented themselves as protecting Medicare from President Barack Obama’s plans to cut spending on the program. “Both Campaigns Seize Role of Medicare Defender,” a headline in the New York Times read in the summer of 2012. This stance was especially notable because Ryan, the chairman of the House Budget Committee at the time, was seen as a champion of changes designed to restrain Medicare's spending.

Election-year posturing may be normal, if unappealing. But President Donald Trump’s position on Medicare and Social Security has carried over from campaign season and is outside the Republican norm.

He has repeatedly stated that he will not cut spending on Medicare and Social Security. The president's will about this appears to be strong. For example, he resisted his budget director’s attempt last fall to advocate for changes in Medicare and Social Security that would reduce their future spending along with the national debt.

For his part, House Speaker Ryan has still presented the typical GOP view. “Good reforms can mean that we can better perform the mission of these important programs, health and retirement security, without bankrupting the country,” he said last month. The speaker expressed optimism that if Republicans keep the House and expand their majority in the Senate following next month’s midterm elections, then such reforms could occur.

Count me as skeptical. Congressional Republicans have been quite happy to go where the president is pointing on entitlements and on much else. If anything, Democrats are moving toward expanding spending on these programs.

This is a bad for the U.S. for several reasons. For one, ignoring this problem will only make it worse. Each year without reform means any changes to these programs will be more disruptive — making it more difficult for workers to plan for their retirement and for the political system to enact even simple, common-sense measures.

Then there is the Republicans' unfortunate rhetoric (also common among Democrats) about your taxes paying for your benefits. In reality, taxes collected from today’s workers are used to finance benefits for today’s retirees. And you aren’t getting the same amount you pay into the Medicare system; you're getting more. An Urban Institute study finds that a married couple with two average earners who turn 65 in 2020 will receive three times as much in Medicare benefits than they have paid in Medicare taxes.

The GOP’s rhetoric reinforces popular misconceptions about how these programs work, making reform even more politically difficult.

On Monday, the Trump administration announced that the budget deficit had risen 17 percent in fiscal 2018, to $779 billion, driven largely by falling federal revenues. But long-term projections suggest that debt and deficit increases over time will be driven largely by entitlement spending — a point made by Senate majority leader Mitch McConnell in an interview on Tuesday with Bloomberg News.

Under current law, Social Security spending is expected to increase from 4.9 percent of annual economic output this year to 6.3 percent three decades from now. Medicare spending’s share of GDP alone will increase by three percentage points over the same period. These increases roughly equal the entire projected increase in the federal budget deficit.

At the same time, spending on programs other than health and retirement — including much of the U.S. social safety net, and also the military, education, transportation, research, the FBI and much more — is already expected to fall over the next 30 years.

The trajectory of the U.S. national debt needs to be addressed. It cannot be addressed without reducing federal spending, and middle-class entitlement programs are where the money is. If Republicans abandon efforts to reduce the deficit by cutting this spending, then their temptation to shrink it on the backs of the poor will only increase. It would be immoral to target spending cuts on the poor while leaving programs used by the middle class largely untouched. In addition, such a strategy would not be successful because that spending isn’t driving increases in the debt.

Entitlement reform is more than an accounting exercise. At stake is the health care and retirement security for future generations. The sooner we act, the better we will be able to protect those who will be affected by the change. Conservatism has seen this issue as an exercise in advancing the common good.

The GOP’s turn away from reducing future entitlement spending is bad for conservatism, which has prided itself on promoting the common good and possessing a serious governing vision based on objective reality and prudent judgment. 

Populism is polluting this vision. President Trump knows who elected him, and many of his supporters think they would be hurt by changes to Medicare and Social Security. The GOP’s abandonment of entitlement reform is another example of putting the good of the whole aside in favor of what’s good for the tribe.

To contact the editor responsible for this story: Katy Roberts at kroberts29@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and resident scholar at the American Enterprise Institute. He is the editor of “The U.S. Labor Market: Questions and Challenges for Public Policy.”

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