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Should we expand or scale back entitlement programs?

BY DI STAFF | DECEMBER 06, 2013 5:00 AM

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Recent debates over the federal budget and income inequality have raised a number of questions about the future of America’s social safety-net programs — Social Security and Medicare, most notably. These programs have been very successful in reducing poverty and expanding health-care access, but their collective cost is high and rising fast.

Expand entitlement programs

Much of the economic debate in the United States today is focused on the supposed deficit “crisis” we are facing, specifically with regards to the amount of money spent on federal entitlement programs such as Social Security and Medicare.

However, the whole conceit that the United States is facing some sort of “debt crisis” that requires immediate and regressive cuts to entitlement programs is simply false. As Nobel-Prize winning economists Paul Krugman and Joseph Stiglitz have argued, deficit levels are not anywhere near levels that would justify the use of hyperbolic rhetoric such as a “crisis.”

The real crisis, however, lies not in excess government spending but rather in a completely broken labor market, a completely dysfunctional health-care system, and rising income inequality.

The natural solution to these problems would be to expand the programs that have shown the most success in combating these societal ills: Social Security and Medicare.

Social Security has virtually eliminated poverty among the elderly and remains one of the most successful antipoverty programs in American history. Therefore, as I argued in a column a couple of weeks ago, it makes perfect sense to expand the program to include every single American in the form of a Guaranteed Basic Income, a monthly check to all citizens that a wide number of economists have suggested could do as much as halve the poverty rate.

The case is even stronger when it comes to Medicare, which essentially operates like the socialized health-care systems that every other industrialized country on the planet has already adopted, mainly because it increases positive health-care outcomes, cuts down on health-care expenditures (a category in which the United States leads in exchange for middling results), and it’s much simpler to just have the state run the health-insurance industry rather than the myriad, complex, and ineffective methods offered by both our current system and the Affordable Care Act.

When it comes to the question of paying for all these things the answer is, also, surprisingly simple. The elimination of antipoverty programs made redundant by a Social Security expansion such as SNAP and Temporary Assistance for Needy Families, much-needed defense cuts, a carbon tax, and higher taxes on the rich would all provide adequate source of funding for a radical expansion of the American welfare state.

In the end such an expansion is not only sound on a policy level, it also fulfills the U.S. government’s moral obligation to ensure a functioning, healthy, and happy populace.

— by  Matthew Byrd

Make cuts … or else

My dear friend, The Byrdman, argues that the current American budget crisis is more or less a partisan fabrication and so we should take this opportunity to expand Social Security and Medicare in an effort to eliminate poverty.

That plan is admirable for its doe-eyed optimism, if not for its plausibility. The fact of the matter is that Social Security and Medicare are already expanding, and that’s a major problem.

In 1970, 3.8 percent of the U.S. GDP was spent on Medicare, Medicaid, and Social Security. That figure passed 9 percent in 2012 and is projected to balloon to 15 percent by 2037. That massive expansion in federal spending on entitlement programs is due in large part to growing enrollment spurred by an aging country. As the baby boomers retire, costs for programs benefiting seniors are going to soar.

On the back of greater entitlement obligations and higher health-care costs, deficits are projected to begin rising steadily at the end of this decade, leading to levels of debt unseen since the period immediately following World War II.

If the federal debt is not currently a problem, it would certainly become a major source of economic risk in coming decades if the creditworthiness of the United States were to decline or be surpassed by a rising economic power such as China.

In this rather bleak context, Byrd’s utopian vision of an American society that can buy its way out of poverty in the near future begins to break down.

The unfortunate truth is that the long-term outlook of the American economy depends not on an expansion of entitlement programs but on a set of responsible entitlement tweaks designed to keep them fiscally sustainable even at modestly reduced levels.

As New York Times journalist David Leonhardt wrote in his blunt and wonky e-book Here’s the Deal, there is no “plausible solution” to the debt issue “in which health-care [cuts], Social Security [cuts], and taxes don’t compose the vast bulk of deficit savings.”

Byrd argues that tax increases could potentially offset the cost of expanding Social Security and Medicare, but, as Leonhardt notes, taxes are already going to have to rise to pay for the programs as they currently exist. Good luck selling the public on another colossal round of new taxes after that.

Ultimately, entitlement programs may not be the type of problem that requires a Paul Ryan-level slashing — small fixes such as the chained Consumer Price Index and means testing Medicare may be enough — but to suggest expansion as a tenable course when costs are skyrocketing ignores the reality on the ground.

— by Zach Tilly


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