Blam Senior Citizens A Liberal "Fesses Up" - But Gives No Plan

America's Protected Class Stands In The Way Sensible Budgeting

By ROBERT J. SAMUELSON
Posted 08/15/2012 06:07 PM ET

Judging by the political reaction, you'd think that Paul Ryan's budget takes a meat ax to Medicare and threatens economic havoc for the elderly.

Just the opposite is true: the Ryan budget spares older people from almost any change or sacrifice — and that's the problem. We have (and, to be fair, this is mainly the doing of Democrats and their intellectual apologists) made those 65 and over into a politically protected class, of which nothing is expected and everything is given.

It is impossible to have an honest debate about the budget — and government's size and role — unless this changes, because aiding the elderly is now the main thing the federal government does. If you remove that, fearing a backlash from the 50 million or so Social Security and Medicare recipients, you condemn yourself to bad choices:

(a) You can't deal with deficits, which may crowd out productive investment and risk a financial crisis;
(b) you must dramatically squeeze the rest of government, including the social safety net, defense and research; or
(c) you must raise taxes sharply, which may further slow the economy.

Even now the size of the problem isn't fully appreciated. Here's one indicator: Under plausible assumptions, including "full employment" and cutting defense and non-defense discretionary spending by a third, the Congressional Budget Office projects a 2023 deficit equal to 6.75% of the economy. Covering that would require $1 trillion more in taxes, a hike one third higher than the 1970-2011 average.

 Let me now assert the caveats: At 66, I am not against older Americans. I don't want to dismantle Social Security and Medicare. But I do want these programs modernized — to reflect longer life expectancy and the elderly's greater wealth; to lighten the burden on the young (whose taxes support these programs, because almost nothing has been "saved" to pay for them); and to protect government's other functions. Finally, it should be possible to discuss these issues candidly, without being accused of "throwing Grandma under the bus."

It isn't now. Democrats' relentless campaigns against Republicans as threatening to "destroy" Social Security and Medicare have succeeded at intimidation — and, oddly, Ryan is proof.

There are two Ryans: what I call the good Ryan and the bad Ryan. Probably more than anyone in Washington, the good Ryan has highlighted long-term deficits' potential harm to our children and grandchildren. The bad Ryan has fashioned an unrealistic and undesirable budget by trying to accommodate both liberal dogma (don't cut Social Security and Medicare benefits) and conservative dogma (don't raise taxes). Any sensible plan must do both.

Governed by these constraints, Ryan's budget would:

(1) Impose no Social Security cuts — that's 20% of federal spending off the table.

(2) Delay any major change in Medicare until 2023, when recipients could choose either a voucher plan or "traditional" Medicare — that's another 16% of spending unaddressed for a decade.

(3) Convert the federal share of Medicaid (federal-state health insurance for the poor) into a block grant to states, and then increase the grant annually at a lower rate than at present.

(4) Increase most other federal spending, including defense, only by inflation after 2023, a formula that makes no allowance for population growth and could lead to "real" cuts because wages and compensation typically outpace inflation.

(5) Hold taxes at 19% of GDP after 2025, just above the 18% average of the past 40 years.

(6) Cut deficits but not balance the budget until 2040.

This budget would have devastating consequences. Increasing non-Social Security and health spending only at the rate of inflation would gradually shrink most other federal programs. (From 2011 to 2030, these other programs would decline by more than half, from 12.5% of GDP to 5.75%, projects the CBO.) Defense cuts could verge on unilateral disarmament. States and localities would suffer, as the value of federal grants shriveled. The FBI, the National Institutes of Health and other federal agencies starve.

By contrast, the elderly would be mainly spared. Spending on them in 2030 would drop only slightly, estimates the CBO. Despite this, Obama warns that Republicans "would end Medicare as we know it." Liberal pundits say the GOP would "kill" Medicare. It is this cynical fear-mongering that poisons debate. One reason Democrats won't change entitlements is that defending them is so politically rewarding. This, as much as Republican tax intransigence, underlies the stalemate.

There are no painless cures for deficits. But all cures are unnecessarily hard and harsh because we maintain a protected class excluded from any solution.