Marines Over Medicaid

Reprinted with permission of the National Review. 

To the great surprise of nobody, another blue-ribbon panel of Washington’s A-list nabobs has failed at its task: In this case, it is the so-called supercommittee charged with nudging the federal government away from the edge of the debt abyss. Investors despaired at the news, and there was talk of a second downgrade of U.S. Treasury debt.

The failure of the supercommittee is a testament to Democrats’ tax obsession. With the supercommittee having fizzled, the next step is the automatic sequestration process, which imposes 50 percent of the cuts on a program that accounts for only 20 percent of spending (national defense) while leaving the entitlements largely untouched. But the country needs the Marines more than it needs Medicaid.

The talks broke down because Democrats demanded $1 trillion in tax increases as the price of doing any deal that included entitlement savings — which is to say, as the price of doing any deal that begins to address the major drivers of spending going forward. Republicans have never quite owned up to being open to a tax increase, but that is what they are talking about when they talk about “pro-growth tax reform,” which includes broadening the tax base and eliminating some deductions and exemptions, producing a net tax increase even if tax rates stay the same or go down. But even that isn’t good enough for the Democrats, who insist that any tax increase be enacted through a relatively narrow range of options, mostly through raising tax rates on individuals with above-average incomes and on businesses that do not fall within the protective circle of Democrats’ political favoritism. (Don’t expect General Electric or the next Solyndra to start paying 35 percent, whatever else happens.) Because Republicans rightly declined to go along with this class-warfare program and insisted upon savings in entitlements, the supercommittee failed.

The sobering thing is that even the massive tax increases the Democrats wish to inflict upon the nation would not close the deficit that our entitlement programs will produce if left unreformed. A study by the International Monetary Fund estimates that, in order to keep entitlement spending at current levels while stabilizing the debt, every federal tax on the books — income tax, payroll taxes, excise taxes, etc. — would have to be raised by 88 percent. Democrats will be happy to run against entitlement reform, and they will wallpaper the airwaves with vulgar advertisements that show Paul Ryan running granny off a cliff in her wheelchair. But they are really running on an 88 percent tax hike — that or massive, unsustainable deficits.

Voters are beginning to understand as much, and that means that Republicans have a two-fold task ahead of them: The first is to overturn the automatic defense-spending cuts, locating savings elsewhere in the federal budget to offset them. Unlike most of what the federal government does, national defense is a real, pressing, national priority that is unquestionably a government responsibility. The range of threats facing the United States is broad and deep, and a single 9/11-scale attack could in financial terms alone cost the nation far more than we would save through defense cutbacks, to say nothing of the loss of life. Defense is one of the few federal functions in which budgetary concerns must perforce take a backseat to global political realities.

The same is not true of the entitlement programs, and so the second part of the Republicans’ task is to take that case to the voters in November. Most of the Republican presidential hopefuls have developed thoughtful, credible, long-term solutions to the financial imbalances of Social Security, Medicare, and Medicaid. The reforms they are proposing — means testing, gradually raising the retirement age, changing the indexing formulae — are far short of the radical changes that have been contemplated by some on the right. But properly executed they would bring the programs back into balance, a goal that is of critical importance as our population ages and the financial stress on the entitlements becomes more acute. Changing the terms of Social Security for a well-off 35-year-old decades away from collecting any benefits is not relegating granny to a cat-food diet, and Republicans should be willing to make that case. 

Meanwhile, another opportunity to control spending and rationalize the tax code has come and gone. Our supply of such opportunities is not unlimited.

Comments

[PJ Smith]

Before we panic over the defense "cuts", we might consider whether they're really just reductions in the rate of growth below the projected base-line. Base-line budgeting, as used by our politicians, assumes that all government expenditures should rise by a little over seven percent every year. So when our Congress wails about a "cut" it's really just a decrease in the rate of growth, but the spending grows nonetheless.

We're winding down wars on two fronts. Does military spending still need to increase with the ridiculous base-line? Does it need to increase at all?

[Jane]

As Mark Steyn says, Congress is trying to decide to bail out the titanic with a thimble or a teaspoon.