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Eli Lehrer

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Cut Medicare and Social Security Now

Posted: 07/16/2012 12:05 pm

Everyone has a different way of defining the "fat" in the federal budget. Liberals like to point to waste at the Pentagon and certain types of "corporate welfare" that benefit industries they dislike, such as oil and coal companies. Conservatives, likewise, direct their ire at handouts to things they dislike, like solar cell makers and the National Endowment for the Arts. And budget hawks on both sides of the political spectrum point out the way the government wastes money on subsidies to food growers and water projects.

Both liberals and conservatives sometimes have good ideas for cuts but the popular let's cut this lists aren't the real problem. The NEA is a statistical rounding error in the federal budget, subsidies to farmers contribute to less than 1 percent of all spending, and much of the Pentagon's spending is driven by service member salaries and benefits that are politically impossible to touch. In this context, the "third rail" of American politics -- cuts to Social Security and Medicare entitlements for current and near future beneficiaries -- are the best, most humane, and least painful targets for real cuts in the short term. Paul Ryan's budget left them out by calling for most reforms to take place in more than a decade. A look at the budget shows why other deep cuts are undesirable or difficult elsewhere and how Medicare and Social Security cuts could be done in a fashion that would cause surprisingly little pain for the country.

For starters, Social Security and Medicare/Medicaid represent 43 percent of the federal budget; by far the largest share. By way of comparison, 13 percent of government spending is allocated to other "mandatory/entitlement" programs (like food stamps and highway maintenance), 19 percent for defense, 18 percent for domestic, discretionary spending and the final six percent for debt interest.

Like Medicare and Social Security, each category of spending has strong advocates. While there's certainly waste in the domestic discretionary budget, a large portion of the budget involves programs that are true core government services like the FBI, the Centers for Disease Control, and the FDA's Food Safety and Inspection Service. And even if the domestic discretionary budget were cut in half, it still wouldn't bring the budget close to in-balance.

Likewise, while some cuts to defense spending probably would make sense, they aren't very likely. Mitt Romney has actually promised to increase defense spending and President Obama has made no promises to cut it. Debt interest obviously needs to be paid, even if a few whackjobs argue otherwise. The list could go on. In short, there's no reason to think any particular program will be easy to cut.

And this leaves entitlements, ironically, as low-hanging fruit. The fundamental purpose of Social Security is to assure that no old people live in deep poverty while the Medicare program exists to assure everyone over 65 gets the healthcare they need. The current programs accomplish this by giving every old or disabled person a pension check each month and providing full-scale health insurance to everyone who qualifies for Medicare. These programs do "work," but they have the unfortunate side effect of providing benefits to people who don't need them. It's absurd that Warren Buffett, the second wealthiest person in the country, gets both Social Security and Medicare. Few would disagree he should pay his own way.

Fortunately, there is an easy fix for this: A Social Security minimum guarantee and a Medicare voucher system. A minimum government-guaranteed income of somewhere between 130 and 200 percent of the poverty rate for everyone over 65 would cost far less than the current Social Security system and would actually increase benefits for people who need them the most. Some sort of voucher that covered the full cost of healthcare for poorer old people and declined in value (eventually to zero) for people who earn a lot of money well into their 70s, could replace Medicare. Some people might complain, sure, if their benefits were cut, but, relative to the other cuts--defense, core infrastructure, assistance to the truly poor--helping the already well-off enjoy their retirements more simply should not be a national priority.

Support for these types of cuts would almost certainly produce rage at the ballot box -- which would be unfortunate but necessary. In the end, however, they're a lot better and, ultimately, easier than the alternatives.

 

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