Entitled

Alleged deficit reduction from health care reform bill: $1.3 trillion

Size of unfunded liability in Medicare, Medicaid, and Social Security: $100 trillion

Leaving the nation’s budget solvent for our generation: priceless

Of all the challenges facing our leaders in Washington, none is more difficult or urgent than the long-term, structural budget deficits resulting from Medicare, Medicaid, and Social Security. These programs are useful and well-intentioned: They form the bedrock of the American social safety net. Important as they are, however, they have also become exorbitantly expensive.

For perspective, consider that every dollar of tax revenue collected at the federal level in 2009 was used to pay for the cost of entitlement programs. Spending for the wars in Iraq and Afghanistan, the Troubled Asset Relief Program, the American Recovery and Reinvestment Act, and all other defense and discretionary spending was financed solely by deficit spending. In short, even if we decided that the government’s only job was to manage these entitlement programs and cut all other spending to zero, we’d still only break even—our $12.7 billion of existing national debt would remain unpaid. The magnitude of the problem has become so great that it can no longer be ignored.

Real reform must address these three programs. And it must alter the very structure of the programs, which were created in a time when the U.S. could be certain that the working young would make up a large share of its population. Fortunately, there are three groups in favor of reform: conservative economists, liberal economists, and Republican elected officials. The last group that needs to get on the reform train is Democrats in public office.

In a rare show of bipartisanship, the need for fundamental reform has united disparate factions of academia. In a 2005 paper entitled “Nonpartisan Social Security Reform Plan,” a trio of economists—including a former Bush economic advisor and a senior official in the Obama administration (Kennedy School Professor Jeff Liebman)—propose a plan to ensure the solvency of Social Security by increasing the retirement age, increasing the payroll tax cap, and, most importantly, offering personal retirement accounts that would allow workers to contribute into what is essentially a government-sponsored Individual Retirement Account, investing a mandated amount of their earnings. A nonpartisan analysis by the Congressional Budget Office found that the plan would preserve benefits for retirees for almost 100 years.

A common objection to the addition of personal retirement accounts to Social Security is that allowing Americans to invest and earn interest on part of their Social Security payments might have left many of the elderly bankrupt after the financial meltdown of 2008. However, despite the desire of some to strike fear into the hearts of retirees, a worker retiring today who had been allowed to begin investing his Social Security premiums when starting work 40 years ago would have accrued more money by now than is promised by Social Security.

The plan put forth by Liebman and his colleagues fixes the Social Security solvency problem without requiring draconian tax hikes or damaging benefit cuts. Moreover, it’s not just an academic proposal: public advocates include a number of Congressional Republicans, most notably and recently Paul Ryan (R-Wis.).

So why hasn’t this bipartisan, common sense reform been passed into law? Because Democrats in Congress refuse to acknowledge a problem exists and insist on preserving the “sanctity” of the Social Security system, which is code for wanting the problem to be dealt with by tax increases alone. Harry Reid (D-Nev.) called the issue a crisis “manufactured” by the Bush administration and said Social Security will be safe for “50 years,” ignoring the fact that the system will pay out more this year than it takes in. Nancy Pelosi (D-Calif.), meanwhile, disingenuously claimed that she opposed a plan to introduce personal accounts because she did not want to “bleed Social Security of $2 trillion” conveniently ignoring the fact that this extra $2 trillion would instead be paid to individuals from their own private accounts, with interest.

Medicare is an even more daunting challenge. While economists have proposed common-sense reforms, like health savings accounts that are also supported by Congressional Republicans, Democrats continue to hold back the process. The recently-passed health care reform bill, for example, directly attacks Health Savings Accounts and other consumer-led Medicare innovations that are both important features of the program as it exists today, especially for the poor, and would help mitigate the budgetary problems.

Why are Democrats standing in the way of common sense and smart budgeting? We’ll give them the benefit of the doubt and assume they understand the details of the plans. What they don’t seem to understand, however, is the urgency of the problem: Instead of focusing on reforming the parts of the budget that will lead to unbearable costs in the future, Democrats embarked on an ideologically-driven crusade to expand government, exacerbating an already huge budgetary problem by dumping 16 million additional Americans into Medicaid through the recently passed health care bill that actually raises the deficit once accounting gimmicks are corrected for.

After the admitted budgetary excesses of some past Republicans, it appears the Democrats in Congress feel—dare we say it—entitled to push the limits of fiscal sanity in favor of long-sought-after liberal agenda items. They are welcome to set their own priorities. But, on their current path, they ought to be honest about who the true obstructionists to deficit reduction are—themselves.

Colin J. Motley ’10 is an economics concentrator in Winthrop House. Caleb L. Weatherl ’10, a Crimson editorial writer, is an economics concentrator in Currier House. They are both former presidents of the Harvard Republican Club.