Commentary Magazine


Topic: entitlements

What’s Wrong with the American Economy?

Growth in the American economy since the year 2000 has averaged 1.7 percent per annum. That’s about half of what it averaged in the Reagan, Bush I, and Clinton years. Unemployment, especially in the broader measures, remains stubbornly high five years after the recession of 2007-2009 ended. What’s going on?

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Growth in the American economy since the year 2000 has averaged 1.7 percent per annum. That’s about half of what it averaged in the Reagan, Bush I, and Clinton years. Unemployment, especially in the broader measures, remains stubbornly high five years after the recession of 2007-2009 ended. What’s going on?

According to Peter Morici, an economics professor at the University of Maryland (and the bow-tied star of TV commercials for Kyocera office equipment) the problems lie in five key areas. 1) Poorly enforced trade agreements that allow China to manipulate its currency and export more goods to the United States, costing U.S. jobs. 2) Counterproductive energy policies that reduce domestic production, and therefore jobs, and cause more oil to be imported. 3) Burdensome regulations and taxation, such as restrictive licensing requirements and the highest corporate tax in the developed world. 4) Crony capitalism that reduces competition in the private sector in exchange for political contributions. 5) Disincentives to work, such as ever-expanding entitlements.

The good news is that, unlike the economic problems faced by many countries, all of these problems are amenable to reform. The bad news is that reforming the status quo, which always has determined defenders, requires strong presidential leadership and a Congress capable of acting in the national interest, not just in its members’ interests.

Right now, of course, we have neither. Even Democrats are beginning to notice that the Obama presidency is notably lacking in leadership. And Congress is more dysfunctional than it has been in a very long time. The latter problem can be at least partially ameliorated in a month. The former will have to wait until 2017.

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Presidential Longevity and Social Security

Today is George H.W. Bush’s 90th birthday. That is certainly an event worth celebrating, and may he enjoy many more. But it is also illustrative of a remarkable increase in longevity enjoyed by recent presidents (and the rest of us).

Before there were presidents there were English sovereigns. Not one of them lived to see his or her 70th birthday until George II, who died in 1760, aged 76. To be sure a few of them, such as Edward II, Richard II, and Henry VI, were assisted early into that good night for political reasons.

Of the first six presidents, four of them (Adams, Jefferson, Madison, and John Quincy Adams), remarkably, lived to be over 80 and John Adams lived to be 90 and 8 months, a presidential longevity record that would last into the 21st century, until Ronald Reagan surpassed him in 2001. But from John Quincy Adams to Herbert Hoover, more than a century later, no president made it to 80. Hoover lived to be 90 and two months. Harry Truman, who died at the age of 88, was the only other president to live to 80 until Richard Nixon.

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Today is George H.W. Bush’s 90th birthday. That is certainly an event worth celebrating, and may he enjoy many more. But it is also illustrative of a remarkable increase in longevity enjoyed by recent presidents (and the rest of us).

Before there were presidents there were English sovereigns. Not one of them lived to see his or her 70th birthday until George II, who died in 1760, aged 76. To be sure a few of them, such as Edward II, Richard II, and Henry VI, were assisted early into that good night for political reasons.

Of the first six presidents, four of them (Adams, Jefferson, Madison, and John Quincy Adams), remarkably, lived to be over 80 and John Adams lived to be 90 and 8 months, a presidential longevity record that would last into the 21st century, until Ronald Reagan surpassed him in 2001. But from John Quincy Adams to Herbert Hoover, more than a century later, no president made it to 80. Hoover lived to be 90 and two months. Harry Truman, who died at the age of 88, was the only other president to live to 80 until Richard Nixon.

But starting with Nixon, every president has either lived to the age of 80 or is still alive. Reagan and Ford each lived to be 93, and Ford holds the longevity record at the moment, dying at the age of 93 and five months. On October 1 this year, Jimmy Carter will also turn 90.

Living to 100 used to be exceedingly rare, but not anymore. Among the famous who have reached 100 in recent decades are Irving Berlin, the Queen Mother, Rose Kennedy, Brooke Astor, Bob Hope, and George Burns. I have a friend who is in robust good health at the age of 84. Her mother, in equally robust health except for being a bit deaf, is 109.

All this, while unreservedly good news for all of us, has profound policy implications regarding entitlement programs such as Medicare and Social Security. The latter program was instituted in 1935 and set the age for receiving benefits at 65. The reason 65 was chosen is that that was the life expectancy in the 1930s. Today, in the United States, it is 79.8 for women and 77.4 for men and rising quickly. That is no small part of the reason both programs are headed inexorably toward insolvency unless Congress acknowledges mathematical and medical reality.

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Sarah Palin Continues to Discredit Herself

Sarah Palin continues to act in ways that confirm some of the more negative things said about her.

For example, she’s taken to Facebook to attack the most recent budget plan by House Budget Committee Chairman Paul Ryan. According to Ms. Palin:

The latest Ryan (R, Wisconsin) Budget is not an April Fool’s joke. But it really IS a joke because it is STILL not seeing the problem; it STILL is not proposing reining in wasteful government overspending TODAY, instead of speculating years out that some future Congress and White House may possibly, hopefully, eh-who-knows, take responsibility for today’s budgetary selfishness and shortsightedness to do so. THIS is the definition of insanity. Do we still not understand how dangerous it is to allow government to grow unchecked as we shackle ourselves with massive debt – a good portion of which is held by foreign nations who don’t necessarily like us? If we can’t balance the budget today, what on earth makes us think it will happen at some future date? The solution is staring us in the face. We need to rein in spending today, and don’t tell me there is nothing to cut when we know every omnibus bill is loaded with pork and kickbacks.

Reading the article linked below gave me the same reaction that my daughter just caused when she punked me with a very unfunny April Fool’s Day announcement. As my Dad would say after these April Fool’s announcements, “This would kill a lesser man.” This out-of-control debt is killing our economic future.

Whatever differences Ms. Palin may have with the Ryan plan–and perhaps she’ll take the time to offer an actual critique of if rather than a Facebook entry with lots of upper case words–it’s hardly a joke. But what might elicit a roll of the eyes is comparing Ms. Palin’s views now versus what they were nearly four years ago.

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Sarah Palin continues to act in ways that confirm some of the more negative things said about her.

For example, she’s taken to Facebook to attack the most recent budget plan by House Budget Committee Chairman Paul Ryan. According to Ms. Palin:

The latest Ryan (R, Wisconsin) Budget is not an April Fool’s joke. But it really IS a joke because it is STILL not seeing the problem; it STILL is not proposing reining in wasteful government overspending TODAY, instead of speculating years out that some future Congress and White House may possibly, hopefully, eh-who-knows, take responsibility for today’s budgetary selfishness and shortsightedness to do so. THIS is the definition of insanity. Do we still not understand how dangerous it is to allow government to grow unchecked as we shackle ourselves with massive debt – a good portion of which is held by foreign nations who don’t necessarily like us? If we can’t balance the budget today, what on earth makes us think it will happen at some future date? The solution is staring us in the face. We need to rein in spending today, and don’t tell me there is nothing to cut when we know every omnibus bill is loaded with pork and kickbacks.

Reading the article linked below gave me the same reaction that my daughter just caused when she punked me with a very unfunny April Fool’s Day announcement. As my Dad would say after these April Fool’s announcements, “This would kill a lesser man.” This out-of-control debt is killing our economic future.

Whatever differences Ms. Palin may have with the Ryan plan–and perhaps she’ll take the time to offer an actual critique of if rather than a Facebook entry with lots of upper case words–it’s hardly a joke. But what might elicit a roll of the eyes is comparing Ms. Palin’s views now versus what they were nearly four years ago.

Consider this: On December 10, 2010, Ms. Palin published in her name an op-ed in the Wall Street Journal titled “Why I Support the Ryan Roadmap.” Back then “the Roadmap for America’s Future produced by Rep. Paul Ryan… offers a reliable path to long-term solvency for our entitlement programs, and it does so by encouraging personal responsibility and independence.” And this: “Put simply: Our country is on the path toward bankruptcy. We must turn around before it’s too late, and the [Ryan] Roadmap offers a clear plan for doing so.”

And now consider this: The plan Palin supported in 2010 would have taken over 30 years to balance the budget. The plan she now opposes for not being sufficiently austere would balance the budget in ten years. Mr. Ryan himself has said that this plan cuts more spending than any budget he’s ever written, to the tune of $5.1 trillion over the next decade. In addition, Ryan’s plan calls for overhauling the tax code, repealing the Affordable Care Act, reforming entitlement programs, and promoting energy security.

Now you may believe, as I do, that Ms. Palin long ago ceased being a serious national voice. But she is representative of something real. She personifies a mindset within conservatism that is almost proudly anti-intellectual, one characterized by resentments, that relies on banalities, and is disconnected from reality. It views politics as a pose and seems to take special delight in targeting perceived heretics within the movement. It’s all rather silly.

At the same time, there is something problematic when people on the right, including the GOP vice presidential candidate in 2008, attack those who are actually doing the hard, necessary work of providing a conservative governing alternative to the Obama years. I recognize that posting shallow reactions on Facebook is easier than offering serious analysis or putting together an actual budget. 

Easier, perhaps, but ultimately discrediting.

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The Budget Deficit

The good news is that the budget deficit of the federal government for fiscal 2013 fell by $309 billion, about 30 percent, to its lowest level in five years. It’s the first Obama deficit to be under a trillion dollars. But the bad news is that the deficit, $680.3 billion, is still 4.1 percent of GDP, well above what is considered a safe borrowing level by national governments for long-term fiscal health.

$680.3 billion is a lot of money. It is more than $2,100 for every man, woman, and child in the United States. It is greater than the total GDP of all but 20 countries. Taking inflation into account, it is about equal to the biggest budget deficit experienced in World War II (1943, when we were in the red to the tune of $54.7 billion). It is larger than the entire national debt as recently as 1976.

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The good news is that the budget deficit of the federal government for fiscal 2013 fell by $309 billion, about 30 percent, to its lowest level in five years. It’s the first Obama deficit to be under a trillion dollars. But the bad news is that the deficit, $680.3 billion, is still 4.1 percent of GDP, well above what is considered a safe borrowing level by national governments for long-term fiscal health.

$680.3 billion is a lot of money. It is more than $2,100 for every man, woman, and child in the United States. It is greater than the total GDP of all but 20 countries. Taking inflation into account, it is about equal to the biggest budget deficit experienced in World War II (1943, when we were in the red to the tune of $54.7 billion). It is larger than the entire national debt as recently as 1976.

Absent serious entitlement reform, the deficits are bound to increase in future years as more and more baby boomers retire and begin to receive Medicare and Social Security. The Congressional Budget Office estimates that entitlements will drive the deficits above 6.5 percent of GDP within 25 years, regardless of how well the American economy is performing.

The heart of the problem is that the national debt is a long-term problem and politicians are incentivized to think short-term. It is tomorrow’s headline and next year’s election that politicians care about. A crisis that is ten or twenty years down the road, even though it is clearly discernible now, is going to be someone else’s problem.

But every year that serious fiscal reform is put off, means the crisis, when it hits, will be that much more severe. The people who constitute the federal government today, Republicans and Democrats alike, are committing slow-motion treason by doing nothing now.

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Debt Denial, Entitlements, and the “Caucus of Common Sense”

The Obama administration and its supporters have created a problem for themselves. Having spent four-plus years using straw men to delegitimize opposing viewpoints, they are running out of clever ways to insult the intentions of those who disagree with them while also blaming them for the president’s mistakes. So while the sequester was the president’s idea, those who would let it stand rather than let the president dictate policy to Congress are outside the vastly outnumbered “caucus of common sense,” as Obama has taken to calling it.

That’s a catchy phrase, but they can’t all be winners: this week the president’s advisor Dan Pfeiffer sneered that those who are criticizing the president’s budget proposals want Obama to “enact a Romney economic plan.” (Blaming the previous president at least retained some sort of logic; continuing to go after Romney makes no sense and is marked by a certain classlessness Pfeiffer should try to avoid displaying on behalf of the White House.) But the old standard, and the one to which self-styled “moderates” will forever return, is the label of “centrism.” Heading into the weekend, the president’s former “car czar” Steven Rattner published a piece in the New York Times titled “Reclaim the Center.” Rattner attempts to put both conservatives and liberals on the fringe with regard to budget priorities, and lays out what a true centrist approach–his, of course–would look like. In the process, however, Rattner unwittingly ends up showing that, despite the media narrative of extremist Republicans, it is the left that is much farther from the supposed center.

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The Obama administration and its supporters have created a problem for themselves. Having spent four-plus years using straw men to delegitimize opposing viewpoints, they are running out of clever ways to insult the intentions of those who disagree with them while also blaming them for the president’s mistakes. So while the sequester was the president’s idea, those who would let it stand rather than let the president dictate policy to Congress are outside the vastly outnumbered “caucus of common sense,” as Obama has taken to calling it.

That’s a catchy phrase, but they can’t all be winners: this week the president’s advisor Dan Pfeiffer sneered that those who are criticizing the president’s budget proposals want Obama to “enact a Romney economic plan.” (Blaming the previous president at least retained some sort of logic; continuing to go after Romney makes no sense and is marked by a certain classlessness Pfeiffer should try to avoid displaying on behalf of the White House.) But the old standard, and the one to which self-styled “moderates” will forever return, is the label of “centrism.” Heading into the weekend, the president’s former “car czar” Steven Rattner published a piece in the New York Times titled “Reclaim the Center.” Rattner attempts to put both conservatives and liberals on the fringe with regard to budget priorities, and lays out what a true centrist approach–his, of course–would look like. In the process, however, Rattner unwittingly ends up showing that, despite the media narrative of extremist Republicans, it is the left that is much farther from the supposed center.

Rattner knocks the “delusional” idea held by many liberals that the skyrocketing debt is really nothing to be too concerned about. Here is how he frames the issue on both right and left:

The magnitude of these obligations is just too gargantuan to ever be fully reversed, but we must start now to bend that curve, particularly because any changes in Medicare and Social Security must be phased in over a long period of time. (The menu of policy options is, by now, familiar; we need to start making hard choices.)

That said, in a fragile economy, with the average American still earning less than he did a dozen years ago (after adjustment for inflation), federal belt tightening must occur gradually, a concept that is apparently foreign to both Mr. Stockman and Representative Paul Ryan, the chairman of the House Budget Committee.

You’ll notice something: though Rattner tries to make both sides look equally unreasonable, he doesn’t succeed. Conservatives are actually right about the problem–they just want to implement their solution too quickly for Rattner. In contrast, the liberal view, in Rattner’s telling, doesn’t face up to the existence of the problem in the first place, and thus left-wing “solutions” are destined to make the problem worse or, in some cases, consist of misidentifying the problem as the solution.

Though Rattner doesn’t say so, a good example of the latter view would be a post published the same day as Rattner’s piece in the Washington Post by Ezra Klein. Klein’s headline says it all: “Washington thinks entitlements are the problem. Maybe they’re the answer.” Klein writes that the “three-legged stool” of retirement income security–Social Security, private savings, and employer pensions–is collapsing, with only Social Security left standing. Private savings are in terrible shape, and employer-based retirement accounts are increasingly taking the form of 401(k)s, which are underfunded. He calls attention to a new study for the New America Foundation arguing the real crisis is that Social Security isn’t generous enough, and writes:

They would keep today’s income-based Social Security program, but add a “Part B,” which would be a flat payout to all retirees. When parts A and B are combined, all retirees would be guaranteed 60 percent of their average working wage in retirement, with low earners seeing closer to 100 percent replacement. Part B would be pricey, adding almost a trillion dollars to Social Security’s costs in 2037, and the authors don’t have a clear proposal, much less a politically realistic plan, for how to pay for it.

Repeat: the idea is for the government to add a trillion dollars to the cost of entitlements with no idea how to pay for it. In truth, that should really have been the end of the discussion. With no funding mechanism, it’s not a plan; it’s just a suggestion that the government gives lots more money to people. I don’t even understand the point of publishing the NAF “report.” It’s 27 pages and has four authors, but should really just be one sentence: People would have more money if we gave them more money.

You have to admit, it has a certain airtight logic to it. The president can call for a “common sense caucus” and his former economic advisor can demand they “reclaim the center” all they want, but they surely know where the holdouts can be found. And it’s not in the Tea Party.

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Ryan Shows GOP Is In for the Long Haul

Even before the press conference announcing his budget plan was over, Democrats were bombarding House Budget Committee Chair Paul Ryan with abuse. After years of denouncing Ryan as an extremist, liberals see no need to be diplomatic about the 2012 Republican vice presidential candidate’s ideas. Moreover, after several days of press hype about President Obama’s tentative outreach to Republicans in the capital’s budget standoff, Ryan’s blueprint for cutting spending is being portrayed as nothing less than a provocation intended to deepen the partisan divide. The very act of his sticking to the principles he has consistently articulated throughout his career is viewed as somehow a lack of respect for the verdict of the voters last November as well as an unhelpful diversion from the path to compromise.

Nevertheless, Ryan’s plan was not a mistake. Whatever course the negotiations between the parties take in the coming weeks and months, it is important that Republicans state what they stand for. Elections may have consequences but, as Ryan rightly noted today, they don’t mean the losers must abandon their principles. Restraining the reach of government, cutting back spending and preventing job-killing tax hikes are just as important today as they were before Mitt Romney and Ryan lost. The battle over the direction of the country is not the function of one election or the tussle over the budget in any given year. President Obama’s re-election makes it all the more imperative that conservatives understand that they are involved in a contest over ideas rather than personalities. Far from this being the moment to roll over and confine the debate to one over the details of Obama’s plans, conservatives need to follow Ryan’s example and speak up for what is right if they are ever to prevail.

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Even before the press conference announcing his budget plan was over, Democrats were bombarding House Budget Committee Chair Paul Ryan with abuse. After years of denouncing Ryan as an extremist, liberals see no need to be diplomatic about the 2012 Republican vice presidential candidate’s ideas. Moreover, after several days of press hype about President Obama’s tentative outreach to Republicans in the capital’s budget standoff, Ryan’s blueprint for cutting spending is being portrayed as nothing less than a provocation intended to deepen the partisan divide. The very act of his sticking to the principles he has consistently articulated throughout his career is viewed as somehow a lack of respect for the verdict of the voters last November as well as an unhelpful diversion from the path to compromise.

Nevertheless, Ryan’s plan was not a mistake. Whatever course the negotiations between the parties take in the coming weeks and months, it is important that Republicans state what they stand for. Elections may have consequences but, as Ryan rightly noted today, they don’t mean the losers must abandon their principles. Restraining the reach of government, cutting back spending and preventing job-killing tax hikes are just as important today as they were before Mitt Romney and Ryan lost. The battle over the direction of the country is not the function of one election or the tussle over the budget in any given year. President Obama’s re-election makes it all the more imperative that conservatives understand that they are involved in a contest over ideas rather than personalities. Far from this being the moment to roll over and confine the debate to one over the details of Obama’s plans, conservatives need to follow Ryan’s example and speak up for what is right if they are ever to prevail.

In one sense, Ryan’s critics are right to say his plan is not realistic. Since so much of it is predicated on the idea of repealing ObamaCare it must be admitted that it will not only be dead on arrival in the U.S. Senate after presumably being passed by the GOP-controlled House. Its provisions about ending the president’s signature health care legislation will also ensure that it won’t be a starting point for a putative deal between the White House and Republicans since there is no chance in the foreseeable future that ObamaCare can be eliminated.

But if Republicans are to continue to provide a viable alternative to Obama and the Democrats, it cannot be based on the idea that they are only going to argue about the margins of the debate rather than its substance. As Republican National Committee Chair Reince Priebus has said, Ryan’s budget is in effect a lemon law reminding the American people that there is an alternative to Obama’s health care boondoggle. As ObamaCare starts going into effect and the costs and the negative impact of the legislation are felt, Ryan’s critique will be seen as a dose of political realism rather than the partisan exercise that it is now being called.

It is entirely possible that if the president is serious about compromise that a “grand bargain” about the budget and tax reform can be struck. If so, then it may be that Republicans will give in on some of their positions on taxing just as Democrats will have to do more than pay lip service to entitlement reform.

But whether that happens or not, Republicans are still obligated to do more than provide a faint echo of liberal pieties. The voters chose a divided government last fall, not hegemony for the Democrats. That means any discussion about the budget must have two sides rather than the liberal narrative promoted by the president and his cheerleaders in the media. Ryan’s budget will never become law, but it is an important document that sets out the only real path to national solvency as well as for preserving Medicare. When contrasted with the president’s mindless defense of the status quo on entitlements as well as his inability to put forward to present a path to a balanced budget, Ryan’s plan doesn’t look so crazy.

Democrats who think they can win in 2014 by demagoguery aimed at Ryan are taking it for granted that public opinion is static rather than dynamic. Polls and even election results are variables, but political principles should reflect core beliefs about the future that are consistent with the value we place as a nation on freedom and limited government. There are many aspects of the Republican campaign last year that need revising, but a stand against the growth of government and holding down taxes is not a liability. Ryan has thrown down the gauntlet to the president and told the nation what he stands for. Win or lose, that’s the act of a party that is in this struggle for the long haul and can still eventually prevail.

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Obama’s Threat to the Millennial Generation

In his National Journal article, Ron Brownstein, in commenting on President Obama’s State of the Union address, wrote this:

Especially striking was how much of it seemed targeted directly at the massive and diverse millennial generation, born between 1981 and 2002. Obama addressed them repeatedly: by insisting that entitlement spending on the old must face some limits to prevent it from crowding out investment in the young; by framing climate change as a generational challenge; by pledging to provide young people with more training and to confront rising college costs; and by closing with a paean to citizenship that reflected their civic impulses. “They are the leading edge of where the country is headed ideologically as well as demographically,” one senior White House aide said.

Brownstein, a master of political data, points out that Obama won re-election by a comfortable margin despite “historically weak numbers among the older and blue-collar whites who traditionally anchored the conservative end of the Democratic coalition.” The president won because of his strong support from what Brownstein calls “the Democrats’ new national coalition” – including, importantly, the millennials.

I don’t doubt that in 2012 Obama won in part by his appeal to younger votes and that he’ll spend his second term trying to lock them in for future elections. But there is a substantive point that needs to be made regarding Obama’s appeal to millennial voters, and it goes something like this: the Democratic Party, because of it’s dogmatic resistance to serious entitlement reform, poses a tremendous risk to the millennial generation.

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In his National Journal article, Ron Brownstein, in commenting on President Obama’s State of the Union address, wrote this:

Especially striking was how much of it seemed targeted directly at the massive and diverse millennial generation, born between 1981 and 2002. Obama addressed them repeatedly: by insisting that entitlement spending on the old must face some limits to prevent it from crowding out investment in the young; by framing climate change as a generational challenge; by pledging to provide young people with more training and to confront rising college costs; and by closing with a paean to citizenship that reflected their civic impulses. “They are the leading edge of where the country is headed ideologically as well as demographically,” one senior White House aide said.

Brownstein, a master of political data, points out that Obama won re-election by a comfortable margin despite “historically weak numbers among the older and blue-collar whites who traditionally anchored the conservative end of the Democratic coalition.” The president won because of his strong support from what Brownstein calls “the Democrats’ new national coalition” – including, importantly, the millennials.

I don’t doubt that in 2012 Obama won in part by his appeal to younger votes and that he’ll spend his second term trying to lock them in for future elections. But there is a substantive point that needs to be made regarding Obama’s appeal to millennial voters, and it goes something like this: the Democratic Party, because of it’s dogmatic resistance to serious entitlement reform, poses a tremendous risk to the millennial generation.

Here’s why. The refusal by Democrats to reform entitlement programs in general, and Medicare in particular, means that we will continue to take money from poorer younger people to give it to wealthier older people. Consider: the Pew Research Center reported that over the past quarter-century, households headed by older adults have made dramatic gains in economic well-being relative to those headed by younger adults. In 2009, the average net worth of households headed by adults aged 65 and older was a record 47 times that of households headed by adults under the age of 35. In 1984, the ratio was 10-to-1. What explains this phenomenon? In part it’s because both Social Security and Medicare are open to virtually all American 65 and older, the programs are not means-tested, and their benefits are accruing to a demographic that is growing both in size and in wealth. 

Moreover, if no structural changes to Medicare are made, we will face a debt crisis that will harm the millennial generation above all. They will not have anything like the benefits the older generation has enjoyed. On top of that, our fiscal imbalance is getting worse, not better. The most recent CBO report, for example, predicts the 10-year cumulative deficit is forecast at nearly $7 trillion. This is both generational theft and a factor in our anemic economic growth and job creation, with the younger generation bearing the brunt of it. (The unemployment rate for the millennial generation is over 13 percent, significantly higher than the overall unemployment rate.) As a friend of mine put it, “The millennials are getting by far the worst deal out of Obama and they will suffer the consequences for the rest of their lives; while people over 55 are getting the best deal.”

The challenge the GOP faces, and the opportunity it has, is to explain to younger voters why conservatism is in their best interest; to cut through the Obama cant and demagoguery and obfuscations and explain – in a calm, persuasive, and empirically-grounded manner – why reforming the liberal welfare state is an urgent task, and for the millennial generation more than others.

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Happy New Year, America

If you’d like to have your New Year’s Eve thoroughly ruined, I’d suggest taking a look today at Mortimer Zuckerman’s piece over at USNews.com, “Brace for an Avalanche of Unfunded Debt.”

It’s so depressing because it’s true. The federal government keeps its books not in ways that most clearly reveal the true financial picture, but in ways designed, quite deliberately, to obscure that picture. This is for the short-term benefit of politicians and nothing else, the country be damned. And, as Zuckerman notes, unless something is done about this, and soon, that is exactly what the country will be.

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If you’d like to have your New Year’s Eve thoroughly ruined, I’d suggest taking a look today at Mortimer Zuckerman’s piece over at USNews.com, “Brace for an Avalanche of Unfunded Debt.”

It’s so depressing because it’s true. The federal government keeps its books not in ways that most clearly reveal the true financial picture, but in ways designed, quite deliberately, to obscure that picture. This is for the short-term benefit of politicians and nothing else, the country be damned. And, as Zuckerman notes, unless something is done about this, and soon, that is exactly what the country will be.

As he points out, the country is incurring future financial obligations at the rate of $8 trillion a year. That exceeds the total taxable income of everyone earning more than $66,198 a year and all corporate profits. Even a liberal should be able to understand that if future obligations in entitlements are rising at $8 trillion and the total taxable income of the middle class and up, plus corporations, is $7 trillion, “getting the rich to pay their fair share” won’t do the trick.

The good news, of course, is that these future obligations are not like the national debt, which is at $16 trillion and rising fast. The debt is an inescapable obligation because we pledged the “full faith and credit of the United States” when we borrowed the money. The only alternatives don’t bear thinking about: repudiating the debt or inflating it away.

As Zuckerman points out, it costs $359 billion to service the debt at today’s very low interest rates. Should interest rates begin to rise, either because of returning prosperity or a loss of faith by the market, the cost of servicing the debt will increase $150 billion for every percentage point rise in interest rates. We’re currently paying about 2.2 percent on the debt. Greece is paying over 16 percent to borrow money. As they say: you do the math.

Unlike the debt, future entitlement obligations are obligations only because current law says they are, and laws can be changed. For instance, if we were to, 1) change the formula by which cost-of-living increases in Social Security payments are calculated so that it didn’t overstate inflation as the formula does now, and 2) gradually increase the age of eligibility to reflect ever-increasing life expectancy, Social Security would become solvent for the foreseeable future.

The annual cost-of-living adjustment is designed to keep recipients’ purchasing power intact, but it currently gives them, in effect, a raise. Is it really too much to ask of recipients that they get what’s due them, not more? Likewise, would raising the age of eligibility one month for every year future recipients are now under the age of 55 incur unbearable political opposition? Not if politicians, starting with the president, do their jobs and, you know, lead, explaining the truth and showing the way out of trouble. I have a news bulletin for the political class: the American people are neither stupid nor selfish. Tell them the truth and they will accept it.

But to do that—to tell the American people the truth about the financial situation of the country—requires that politicians surrender the power to keep the books in self-serving ways. The country needs just what corporations have: a set of accounting rules they are obliged to follow that reveal the truth, not conceal it, and an independent authority to certify the books as honest and complete, including future obligations. (The Congressional Budget Office, which “scores” legislation, is nonpartisan, but it is by no means independent. It is a creature of Congress and has no choice but to do Congress’s bidding, which is political protection first, the truth a long-way second.)

There will be no long-term solution to the impending financial disaster until the government keeps honest books. The sooner this fact is on the country’s political radar and becomes part of the discussion, the better. There is not a lot of time left.

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Pew Poll: Majority Would Still Blame GOP for Fiscal Cliff Failure

That recent CNN poll showing a majority of Americans would blame the GOP if the country goes over the fiscal cliff apparently wasn’t an outlier. A new Washington Post-Pew Research Center poll found similar results, The Fix reports:

While 53 percent of those surveyed say the GOP would (and should) lose the fiscal cliff blame game, just 27 percent say President Obama would be deserving of more of the blame. Roughly one in 10 (12 percent) volunteer that both sides would be equally to blame.

Those numbers are largely unchanged from a Post-Pew survey conducted three weeks ago and suggest that for all of the back and forth in Washington on the fiscal cliff, there has been little movement in public perception. The numbers also explain why Republicans privately fret about the political dangers of going over the cliff, while Democrats are more sanguine about such a prospect

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That recent CNN poll showing a majority of Americans would blame the GOP if the country goes over the fiscal cliff apparently wasn’t an outlier. A new Washington Post-Pew Research Center poll found similar results, The Fix reports:

While 53 percent of those surveyed say the GOP would (and should) lose the fiscal cliff blame game, just 27 percent say President Obama would be deserving of more of the blame. Roughly one in 10 (12 percent) volunteer that both sides would be equally to blame.

Those numbers are largely unchanged from a Post-Pew survey conducted three weeks ago and suggest that for all of the back and forth in Washington on the fiscal cliff, there has been little movement in public perception. The numbers also explain why Republicans privately fret about the political dangers of going over the cliff, while Democrats are more sanguine about such a prospect

It’s also why Democrats feel they have an upper hand in negotiations. President Obama has rejected the GOP’s counter-offer to his first proposal, saying that tax hikes are a must and walking back his prior openness on entitlement cuts:

“I don’t think the issue right now has to do with sitting in a room,” Obama said in an interview with Bloomberg TV. “The issue right now that’s relevant is the acknowledgment that if we’re going to raise revenues that are sufficient to balance with the very tough cuts that we’ve already made and the further reforms in entitlements that I’m prepared to make, that we’re going to have to see the rates on the top 2 percent go up. And we’re not going to be able to get a deal without it.”

“It’s not me being stubborn,” Obama added. “It’s not me being partisan. It’s just a matter of math.”

In his first TV interview since winning reelection, Obama said he is open to changes to entitlement programs but wouldn’t commit to benefit cuts. It suggests a step back from his position during his 2011 debt limit negotiations with Boehner, when he agreed to raising the Medicare eligibility age, asking wealthier seniors to pay more for Medicare services and changing the inflation calculator for government programs such as Social Security.

Obama seems more interested in breaking the GOP than reaching a balanced agreement that deals with the entitlement crisis. And it’s not exactly a surprise. He’s always been primarily focused on eking out these little political victories — that’s how he governed during his first term, and that’s how he ran his campaigns. Why would he change now?

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President Obama, Architect of Pain

President Obama’s proposal to Republicans to avoid going over the so-called fiscal cliff — huge tax increases, huge spending increases, and no serious entitlement reform — is risible. What the president is offering up is essentially his last budget, which didn’t win a single vote of support from any member of Congress.  

It may be that this proposal was simply an extreme negotiating position that will be dramatically reshaped over the next 27 days. Or it may be that the president is, for political reasons, happy to have us go over the cliff. The calculation would be that he’s confident he can pin blame on Republicans for this having happened, portraying them as willing to increase taxes on the middle class and wreck the economy in order to keep taxes on the richest 1 percent from going up to Clinton-era rates.

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President Obama’s proposal to Republicans to avoid going over the so-called fiscal cliff — huge tax increases, huge spending increases, and no serious entitlement reform — is risible. What the president is offering up is essentially his last budget, which didn’t win a single vote of support from any member of Congress.  

It may be that this proposal was simply an extreme negotiating position that will be dramatically reshaped over the next 27 days. Or it may be that the president is, for political reasons, happy to have us go over the cliff. The calculation would be that he’s confident he can pin blame on Republicans for this having happened, portraying them as willing to increase taxes on the middle class and wreck the economy in order to keep taxes on the richest 1 percent from going up to Clinton-era rates.

The president, fresh off his re-election victory, does have a strong hand to play. But I agree with those (like Keith Hennessey and Charles Krauthammer) who believe Mr. Obama may well over-reach and in the process severely injure his second term. Because if we go over the fiscal cliff, and as a result unemployment rises to above 9 percent and we go into another recession, there is no way the president escapes responsibility for that. We saw a version of this during the 44-day debt negotiations in the summer of 2011, an ugly and unsatisfying process that left everyone associated with it — including the president — diminished and damaged (for more, see Bob Woodard’s instructive book, The Price of Politics). If we go over the fiscal cliff, it will make that episode look like a model of good government. The public will be enraged at everyone who played a part in this failure — and the most conspicuous person of all will be Mr. Obama.

His first term was characterized by anemic economic growth and job creation — and if no deal is struck between now and the New Year he may well see to it that his second term is no better. This time, by the way, he won’t be able to blame George W. Bush for his failures. Which is another way of saying that the next few weeks could go some distance toward determining whether Obama’s presidency one day ranks as among the most economically ruinous in American history.

In light of that, Republicans should continue to act in a reasonable and responsible way, as Speaker Boehner has with his offer to raise tax revenues in exchange for spending cuts and some steps toward entitlement reform. It may be that the president comes to his senses, and if so they should be ready to deal. But if not, and if the president insists that the GOP jettison its beliefs and simply accede to Mr. Obama’s liberal wish list, Republicans should — in a respectful but firm way — say no thanks. If they do so, Republicans shouldn’t pretend that going over the cliff won’t hurt them. But they shouldn’t be blind to the fact that it will also hurt Mr. Obama, and perhaps permanently.

Republicans, then, are in a somewhat stronger position than they may think. And even if they weren’t, capitulation — which increasingly is what the president seems to demand of them — would be undignified and unwise. If we go over the fiscal cliff, the country will unfortunately suffer. But so, politically, will Barack Obama, the architect of the pain.

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Is Romney Losing the Medicare Argument?

Although today’s Washington Post/ABC poll gives Mitt Romney no reason to panic–he’s down just one point among likely voters–it should at least raise a red flag: Romney does not seem to be pulling away on the economy, the centerpiece of his campaign. But even more frustrating for the campaign may be that Romney picked a fight he now seems to be losing: Medicare. According to the poll, he’s trailing the president on that question too.

Before Romney picked Paul Ryan as his running mate, Gallup’s polling showed that few were thinking about Medicare heading into the election. Think of it as the opportunity cost–which was raised at the time–of diverting the campaign messaging away from the economy. But you can divert attention from the economy if it’s to an issue voters care about, and if you can win the argument over it. Here’s Gallup’s mid-August chart of the “non-economic” issue voters thought presented the “most important problem” (most recent results from left):

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Although today’s Washington Post/ABC poll gives Mitt Romney no reason to panic–he’s down just one point among likely voters–it should at least raise a red flag: Romney does not seem to be pulling away on the economy, the centerpiece of his campaign. But even more frustrating for the campaign may be that Romney picked a fight he now seems to be losing: Medicare. According to the poll, he’s trailing the president on that question too.

Before Romney picked Paul Ryan as his running mate, Gallup’s polling showed that few were thinking about Medicare heading into the election. Think of it as the opportunity cost–which was raised at the time–of diverting the campaign messaging away from the economy. But you can divert attention from the economy if it’s to an issue voters care about, and if you can win the argument over it. Here’s Gallup’s mid-August chart of the “non-economic” issue voters thought presented the “most important problem” (most recent results from left):

 

See “care for the elderly/Medicare” way down there? It went from 1 percent to zero percent. Now, obviously introducing it as a major campaign theme will increase its importance. The New York Times claimed it had become a key issue in swing states, but their poll was so thoroughly discredited as to be useless. And if Romney does succeed in making Medicare a top voter priority, he has another problem: Gallup found two weeks ago that voters give Obama a 12-point advantage on that issue. (Today’s poll has Romney within five points on the question.) That may change, but it seems Romney may have mimicked, rather than learned from, Obama’s health care mistake. Even after Obama passed health care reform, making it by far the most talked-about issue, it remained low on the list of priorities for voters heading into the following election. With time, health care rose on that list of priorities–in part because voters hated the new law so much they resolved to get rid of it.

Obama made two mistakes: he ignored more important issues in favor of health care, and then lost the argument over it once he elevated it in voters’ minds. Romney has the winning argument on the economy, but he’s elevated an issue that just a month ago was far from voters’ top priority. If he loses the Medicare argument, he’ll replicate both of those mistakes.

This is not to say that Medicare shouldn’t be reformed. Indeed, entitlements need reforming even if it’s not too popular politically, and the Democrats’ Mediscare tactics are designed to uphold an unsustainable status quo and strike a devastating blow to the reform agenda in the service of maintaining their hold on power.

Which brings up another challenge for the Romney campaign: to succeed, they must convince voters that if Obama is re-elected, and then chooses to do nothing, entitlements will bring on a fiscal disaster.

It’s a worthy and responsible argument to make, but until voters develop that same sense of urgency, their campaign has shifted from facts (unemployment is high) to speculation (Obama will let Medicare go bankrupt). As I wrote after the Ryan selection, voters were enthused about having “a choice, not a referendum,” as the popular refrain went. But giving voters an argument isn’t good enough; Romney will have to win that argument too. Today’s poll is another indication that he’s struggling to do more than break even on this issue.

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