Social Security, Medicare, and the Current Fiscal Mess
I have been very careful to stay away from making a link between the current explosion in the deficit and the reform of entitlement programs like Social Security and Medicare. It's not that I don't think that a link exists -- it's that I don't think that the case for entitlement reform depends on what part of the business cycle we are in. The case makes sense to me based on the long-term cost projections for those programs.
In today's Washington Post, Robert Kuttner laments that so-called* deficit hawks in Congress are trying to make the link. He opens with:
With the enactment of a large economic stimulus package, fiscal conservatives are using the temporary deficit increase to attack a perennial target -- Social Security and Medicare.
It may be that the recent increase to the deficit is temporary. But even a temporary increase in the deficit is a permanent increase in the debt unless there is enacted some way to specifically repay that debt in the near future. Note the word "repay." It is not enough to just stop running ridiculously high deficits. To repay them, we need to run surpluses. We are nowhere near that. What we got from the Obama Administration was yet another weak use of the phrase "cut the deficit in half" by 2013.
So Kuttner is out of his mind if he thinks that we haven't permanently increased the debt burden on future generations. This is where the link to entitlement programs comes in (for those who need one). From the point of view of future taxpayers, a dollar of debt is a dollar of debt, whether it is debt held by the public or the unfunded obligations of entitlement programs that we refused to reform. This was a problem for President Bush, who insisted that we had a Social Security cost problem that we had to fix but refused to acknowledge that Medicare Part D that he signed into law and the defcits ensuing from the 2001 and 2003 tax cuts each created debt that was larger or comparable to the projected unfunded obligations in Social Security.
It is likewise a problem for those like Kuttner who simply refuse to acknowledge that what we are doing with so-called stimulus bills is spending the next generation's money on things that don't particularly benefit the next generation, just like we do when we pass along unfunded entitlement obligations to them. There is no economic reason, and certainly no moral justification that Kuttner seems to imply, for excluding reforms of entitlement programs that lower cost in progressive ways from public discussion.
*Deficit "hawks" is Kuttner's terminology. Those who voted for the 2001 and 2003 tax cuts or the various bills to make them permanent don't qualify. Those who voted for Medicare Part D don't qualify. Those who voted for the recent stimulus bill also don't qualify, unless they actively tried to remove the pork, tax giveaways, and other elements that were not related to public investment. Are there any of them actually serving in Congress today?