Our Entitlement Paralysis
As noted by recent cover stories in Newsweek and Business Week, the first of the roughly 77 million baby boomers turn 60 in 2006. J. Walker Smith of the polling firm of Yankelovich Partners told Newsweek that many boomers "think they're going to die before they get old" -- a reference to one survey in which boomers defined old age as starting around 80. Business Week asserted that fifty- and sixtysomethings consider their "middle age a new start on life" to indulge hobbies, begin new careers or remarry. These portraits of vigorous baby boomers clash with another reality: Their huge federal retirement benefits may seriously damage the economy and American politics.
Our continued unwillingness to address this disconnect counts as one of 2005's big stories. We should ask ourselves: Why? After all, the need is well known. Consider the Congressional Budget Office's just released projections. By 2030, Social Security, Medicare and Medicaid may cost 15 percent of national income -- almost double their level in 2000 and equal to 75 percent of today's federal budget. Left alone, these programs would require massive tax increases, cause immense deficits or crowd out other important government programs. We also know of at least partial solutions: curb costs by slowly raising eligibility ages and cutting benefits for wealthier recipients.
Still, we fiddle. The paralysis is understandable. No one wants to offend older voters, so we dance around the issues without truly engaging them. President Bush's ill-fated plan for "personal" investment accounts in Social Security was a perfect example. The president complained about unaffordable entitlement spending but never said how his plan would cure that problem. There was a reason: It wouldn't. In its first decades, it would mean more spending, not less. Government would pay for personal accounts and traditional benefits.
Democrats correctly saw Bush's proposal as a political attempt to steal their signature issue -- Social Security. For younger voters, the "personal accounts" might make the program a Republican product. It might cease being liberalism's crown jewel. Naturally, Democrats and the AARP denounced Bush's plan. People shouldn't depend on "risky" stocks for Social Security, they said. By July, an NBC/Wall Street Journal poll found that 57 percent of the public thought personal accounts a "bad idea." Even many Republicans abandoned Bush.
Doubting Bush's motives is easy, because in 2003, he had engaged in a similar political makeover for Medicare, through his drug benefit. It aimed to ingratiate the president with elderly voters in 2004. But the potential cost is huge. By 2015, the drug benefit could increase Medicare costs by 30 percent, says the CBO. All of Bush's complaints about runaway entitlement spending reek of hypocrisy.
But ascribing today's deadlock exclusively to Bush's clumsy partisanship is too glib. It ignores the many years in which Democrats have shamelessly exploited for political advantage any threats to Social Security and Medicare benefits. It also overlooks the deeper and more intractable source of our stalemate: competing moral claims.
If we were creating Social Security and Medicare today, we'd set different terms. The first baby boomers hitting 60 include George W. Bush, Bill Clinton, Donald Trump, Diane Sawyer and Susan Sarandon. It's doubtful we'd provide benefits for any of these wealthy people. Indeed, we'd probably be less generous toward many affluent retirees, because we'd question why age alone (not need) should qualify people for government assistance. We'd also note vast changes since 1935 (Social Security's creation) and 1965 (Medicare's):
In 1935, about 6 percent of the population was 65 and over; now, it's nearly 13 percent and headed toward 20 percent in 2030.
Life expectancy at 65 was less than 13 years in 1935; now, it's 18 and rising.
In 1965, one of three payroll jobs was in manufacturing, mining and construction; now, that's one in six.
Health spending increased from 6 percent of national income in 1965 to 15 percent in 2003.
People live longer, are healthier (77 percent of those age 65 to 74 rate their health as "good" or "excellent'') and have less grueling jobs. They can work longer and receive benefits later. We'd set higher eligibility ages. It's too expensive for government to support them for 20 or 30 years. We'd concentrate aid on the neediest and the oldest, including people whose longevity exhausted their savings. We'd regard this as a moral and practical obligation of a decent society.
Well, if that's what present conditions suggest, why do we tolerate a system that automatically pays many people who are well off and in good health? The answer is that people who have been promised Social Security and Medicare benefits believe they have a moral claim to receive them, even if -- absent the promise -- their claim would be dubious. True, people need to plan their futures. But the moral logic also rationalizes self-interest and selfishness. The compromise is to unwind gradually those promises that no longer make sense and are ultimately unworkable.
Until we challenge this moral logic -- the crux of entitlement politics -- public opinion will resist change and our paralysis will continue. The responsibility for this failure is widespread: among liberals, who like massive government programs; among conservatives, who fantasize about "free market" alternatives to Social Security and Medicare; among pundits and "experts," who speak of the "entitlement crisis" in meaningless generalities or incomprehensible technicalities. Our resulting inaction compounds many future dangers of an aging society: higher taxes, slower economic growth, squeezed government spending for non-elderly programs and more conflict between younger taxpayers and older beneficiaries.