How the aging of America is hurting the Republican Party

February 28, 2013
The future of the Republican Party? (J. Scott Applewhite/Associated Press)
The future of the Republican Party? Rep. Paul Ryan (R-Wisc.), left, and House Speaker John Boehner.  (J. Scott Applewhite/Associated Press)

The Claremont Review recently hosted a spirited forum on the future of the Republican Party. The closing argument from William Voegeli, a senior editor at the Review, is particularly worth considering, as it speaks unusually clearly to a key tension in the Republican coalition.

The Republican Party already has a substantively admirable agenda that, if implemented, would point America in the right direction. The Paul Ryan fiscal framework, which House Republicans overwhelmingly endorsed and which Kabaservice and Frum have criticized, will suffice as a shorthand version of that agenda. I take its essential feature to be that federal spending on entitlement and discretionary domestic programs, which has grown steadily as a proportion of our growing economy for the past eight decades, should account for a declining proportion of a growing economy over coming decades. America, that is, will bend its domestic spending curve downward until it comports with revenues from a tax system no more burdensome than the historic average. An important vehicle for realizing that change will be to means-test and voucherize entitlement programs.

And here's David Frum's response:

Post-2008 hard-right conservatives did rally around one new idea: the Ryan plan praised above by William Voegeli. And what was the Ryan plan? Simply this: a plan to load almost all the burden of fiscal adjustment onto Americans under age 55, while largely exempting Americans over age 55. Even beyond the Ryan plan, the Tea Party championed causes dear to the hearts of retirees and near-retirees. Remember, the issue that launched the Tea Party in the summer of 2009 was...opposition to Medicare cuts for current beneficiaries. That's a strange rallying cry for a purportedly limited government movement. Once you begin to think of the Tea Party as a vehicle for advancing the economic interests of the old against the young, though, a lot of otherwise mysterious behaviors suddenly begin to make sense.

Frum's critique, put simply, is that demographics are destiny for political parties. A party made up of old people will have trouble cutting Medicare, and lo and behold, today's Republican Party, despite believing Medicare the key cause of our budgetary troubles, is even more protective of its near-term spending than the Democrats. A party so reliant on elderly voters could hardly be otherwise.

But demographics don't just drive political parties. They also drive policy. And what's striking about Voegeli's agenda is its distance from the demographic realities driving American policy.

Consider what Voegeli said again. The "essential feature" of the conservative agenda is that "federal spending on entitlement and discretionary domestic programs...should account for a declining proportion of a growing economy over coming decades." There are no numbers in that sentence, but the clue comes shortly thereafter, when he writes that America "will bend its domestic spending curve downward until it comports with revenues from a tax system no more burdensome than the historic average." The need to stick close to the historical tax average is a common conservative talking point, and it typically means revenues around 18 percent of GDP, though that number has only been sufficient to balance the budget in three of the last 50 years.

The problem is that America's demographics have no intention of holding true to their 50-year average. As Ed Kleinbard, a tax professor at USC, points out, the share of the country over 65 will increase by a third in the next 10 years alone. That means a greater share of the country depending on the government -- and, worse even than that, a greater share depending on the government for expensive health-care services. The idea that we can support America in 2025 with the tax code America had in 1975 is foolishness.

But it's foolishness that the Republican Party has yoked itself to, and that requires it to make heroically absurd policy assumptions. Even Ryan's budget can't credibly argue that Medicare and Social Security spending won't grow as a percentage of the economy. Both increase under the path he's laid out. And so he instead argues that Medicaid and the Children's Health Insurance Program will fall by half in the coming decades, which is not possible unless we are going to throw many millions of people out of those programs. Even less likely than that, he says that everything that isn't health-care spending or Social Security will fall by about 75 percent. These aren't reasonable assumptions, of course, but they're also not popular ones. In order to protect seniors, he's gutted everything else in the budget.

I asked Ryan about this at a Wall Street Journal breakfast. See if you can detect an answer in his answer:

EZRA KLEIN:  These conversations tend to focus pretty heavily on Medicare and Social Security in particular.  In your budget, though, a very, very large chunk of the long-term cuts come out of the everything else.  I believe that category of spending –

REP. RYAN:  Probably Medicaid then other mandatory – (inaudible) -- accounts.

EK:  Yeah, Medicaid as well, but Medicaid, Social Security and Medicare, if I remember, actually get a smaller percentage of GDP cuts by 2050 than all other things combined, which go from – if I’m not wrong – around 12 percent now to under 3.75 percent in 2050.

PR:  I haven’t looked at it in a little while.  I was busy since the last – (inaudible).  (Laughter.)

EK:  How does that path work?  We’ve always had defense spending above 3 percent or 4 percent of GDP.  That was obviously a base of 4 percent under Romney.  How would it work to bring all other categories, including defense, down to that sort of low of a percentage of the budget?

REP. RYAN:  Yeah – I’ve never been a fan of putting a floor on anything.  So, you know, my friends at Heritage, you know, want the 4 percent floor.  I don’t – I don’t like the idea of just putting arbitrary floors under anything.  So I’ve never personally believed that, agreed with that approach.

As you know, if you’re holding discretionary at some rate of growth slower than the economy, its take as a percentage of the economy shrinks over time.  The baseline just does that.  So you know how mandatory is squeezing discretionary, and over time discretionary shrinks as a share of the economy.  So I don’t really think, especially looking at the out years, that the spending on a program as a share of GDP is really a good reflection of what these programs look like because the economy will outgrow certain programs that you’re constraining the growth on, and that doesn’t necessarily reflect how good the policy is or how much, you know, you’re dedicating to it.  So I always warn people about out-year assessments on, say, discretionary or other mandatory or whatever category as a percentage of GDP in the out years, number one.

Number two, Medicaid, we’re – we believe in federalism.  We believe in block granting.  Obviously we believe in repealing “Obamacare.”  So if you repeal “Obamacare,” which, you know, you have about, what, a 33 increase percent in the eligibility and you block grant, the governors we consulted said, give us population plus inflation, that gets us a lot of savings in the 10-year window.

And the other mandatory category, which is a lot of programs, there are a lot of reforms that we think are desperately needed.  SNAP is one of the those programs we think is in desperate need of reforms.  We see a lot of those programs in sort of a – we call it welfare reform part two, which was to embrace the federalism notion and embrace what were the successful tools that help get welfare reform off and running in such a successful way.  Ron Haskins has done a lot of work over at Brookings on this, which is, you know, time limits, work requirements, those kinds of things.  So we think those are good, quality reforms that help people on the path of upward mobility and social mobility.

At the same time, it does produce savings in the set – in the 10-year window, it slows the growth rate, and as the growth rate slows and the economy grows, the delta, you know, increases.

There's nothing in that answer that makes Ryan's budget plausible. The most radical -- and, for budgetary purposes, important -- assumptions of Ryan's budget, in fact, don't even stick in his mind.

This is a problem the Republican Party has to grapple with more fully. The country's changing demographics, alongside the growth in health-care costs, make funding anything even close to the current level of government services at traditional levels of taxation impossible. Perhaps the numbers could work if Republicans were open to truly dramatic cuts to programs for seniors, but they are, at this point, arguably even more protective of those programs than the Democrats. Their ideas for reform involve changes to the program that won't happen for another decade, and that may or may not work once they do happen. That's a hope, not a plan, and believing it will work as well as Ryan promises requires a faith in government action that's surprising to find among conservatives.

In the meantime, to make their numbers work in the face of changing demographics and rising health-care costs, they need to make genuinely draconian cuts to the programs that people who aren't seniors rely on. That makes them even less popular party among the under-65 set, further exacerbating the fundamental tension of the modern GOP: That their core agenda is to turn back the spending patterns driven by the aging of the population, but their core constituency is the part of the population that's aging and relies most on those programs.

Further reading:

- The misguided 18 percent budget solution.

- Why taxes must rise, by Ed Kleinbard.

- Toward a Republican synthesis, by Ross Douthat.

 

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Evan Soltas · February 28, 2013