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April 16, 2018

Entitlements: Moral Bankruptcy Fuels Fiscal Bankruptcy

And if enough Americans continue countenancing the former, the latter is inevitable.

Few things reveal the fraudulent nature of our ostensible two-party system better than the nation’s steady march toward fiscal armageddon. Neither Democrats nor Republicans evince anything resembling fiscal responsibility. Instead both parties are about prioritizing programs, entitlements and pork-barrel spending projects each one needs to ensure its respective political constituencies are sufficiently bought off. In short, political self-interest has eviscerated statesmanship.

“Deficits will top $800 billion this year and will reach $1 trillion by 2020, just as President Trump prepares to face voters in his bid for re-election,” The Washington Times reports. “They will remain above $1 trillion for the foreseeable future … painting a better economic picture but a significantly worse fiscal picture than last year.”

The future revealed by the Congressional Budget Office’s (CBO) “2017 Long-Term Budget Outlook” is surreal. And despite assertions by a group of liberal economists that the latest tax cuts, rather than entitlement programs, are leading the way, is absurd.

Between 2017 and 2047, Social Security and Medicare alone will engender an $82 trillion deficit. “Specifically, Medicare will run a $40 trillion cash deficit, Social Security will run a $19 trillion cash deficit, and the interest costs of those deficits will add $23 trillion more,” explains Manhattan Institute senior fellow Brian Riedl. “The rest of the budget had been projected to run a $4 trillion surplus over this period, although making the latest tax cuts permanent would likely change this to a roughly $5 trillion deficit.”

Riedl further notes that, irrespective of potential tax cut permanency, revenue intake by the Treasury Department is still expected to “soar” above the 17.4% average share of the nation’s Gross Domestic Product (GDP) that has held steady for decades. By contrast, spending on Social Security, Medicare and interest on the debt will more than double from 8.1% to 16.4% of GDP over the same 30-year period.

The way the system was set up makes this inevitable. When Social Security was initiated in 1935, the average life expectancy of Americans was 61.7 years. Now life expectancy averages 78 years. Thus it should surprise no one that many, if not most, Americans will receive more money than they paid into the system, even as the system is supported by a drastically reduced ratio of workers to retirees.

Medicare is equally problematic. As an Urban Institute report reveals, today’s typical retiring couple will have paid $140,000 into Medicare, but will receive $420,000 in benefits, with both numbers adjusted to net present values.

Moreover, no other program better demonstrates how colossally wrong Congress can be with regard to cost predictions for entitlements. When Medicare was created in 1965, it cost $3 billion. That same year the House Ways and Means Committee estimated the program would cost approximately $12 billion by 1990, even allowing for inflation.

In 1990, Medicare cost $107 billion.

The above input-outtake stats reveal that many Americans are doing rather well with regard to either or both programs. And as it currently stands, both programs are on autopilot, unconstrained by fiscal reality. Thus, nothing short of massive tax increases — or massive entitlement reform — will solve the problem.

Enter statesmanship, or more accurately, the utter lack of it, coupled with ideological demagoguery that makes genuine reform virtually impossible. Whether they know it or not, while politicians in both parties were creating entitlements for Americans — even with the most well-meaning motives in many cases — they were also creating an entitlement mentality that has reached metastatic levels.

Younger Americans may not know it, but there was a time when taking money from the government only occurred when one had exhausted every other possibility for self-support. Today millions of Americans embrace entitlements as a lifestyle choice — one government has made every effort to de-stigmatize.

And that’s only part of the problem. Despite evidence to the contrary, many Americans remain firmly convinced that whatever money they have paid into the system is equal to, or less than, any money they will ever take out of it in retirement. Thus, even if future reform is instituted, they nonetheless conflate the attempt to right the ship for future retirees as an assault on their “untouchable” piece of the pie. Add a dollop of rank cynicism to the mix — as in, “I don’t care what happens to the country after I’m dead” — and it becomes easy to understand why entitlement reform is derisively referred to as the “third rail of politics,” in all its attendant political career-ending implications.

Ideology? Democrats have made convincing Americans they are victims in need of ever-expanding government to solve their problems one of their party’s principal political planks for years.

Republicans? At best, Republicans enabled Democrats, epitomized by their failure to repeal ObamaCare, or their passage of the $1.3 trillion omnibus budget President Donald Trump signed last month. At worst, they emulated them, as in the break-the-bank spending they justified as “compassionate conservatism” during the tenure of George W. Bush.

A tenure of debt-accumulating fiscal irresponsibility topped only by the irresponsibility of the Barack Obama years.

As columnist Dan McLaughlin writes, the game continues because the GOP is willing to countenance “massive all-or-nothing omnibus bills rather than break down appropriations into smaller pieces that can be individually debated and voted on.” He explains, “This excess of brinksmanship gives a massive structural advantage towards the passage of individual spending items that could not survive on their own, since the choice is literally one between shutting down the government and approving all the spending on everything.”

Everything includes the military, and one sentence by columnist Bill Kilgore eviscerates Trump’s faux rationale for signing the omnibus atrocity. “In the coming months,” he writes, “Republicans and Americans need to realize the strength of our national defense is not the same thing as how much money we flush down the Pentagon’s toilet.”

In a spasm of (calculated) remorse, House Republicans tried last Thursday to pass a balanced budget amendment to the Constitution. Despite the fact that any constitutional amendment needs two-thirds of both congressional chambers and three-fourths of state legislatures to become law, these “repentants” couldn’t even get two-thirds of the House to approve the measure.

Columnist James C. Capretta cuts through the orchestrated self-pity party. “If Republicans were serious about taking action on the budget, they would offer a plan to reform entitlements and thus begin to lower federal spending over the next two decades — rather than float a constitutional amendment that they know stands no chance of being approved,” he asserts.

They might try something else as well, as in addressing our fiscal time bomb in moral terms. It may be a long shot, but the same Americans whose eyes glaze over when the discussion turns to economics might be far less sanguine if they realized we have become a nation so addicted to spending we are willing to destroy the futures of our own children and grandchildren.

In short, moral bankruptcy engenders fiscal bankruptcy. And if enough Americans continue countenancing the former, the latter is inevitable.

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