THE CONGRESSIONAL Budget Office and to a lesser extent the Office of Management and Budget have taken to dividing all domestic spending into two broad categories -- discretionary and entitlements. The discretionary programs are those subject to the annual appropriations process; the entitlements are benefits paid out automatically each year to all who qualify unless there is a change in underlying law.
In terms of how spending is generated and the depth of obligation it represents, this is a useful distinction. But the term entitlements has come to obscure more than it clarifies. The massive benefit programs have been a major factor in the budget's rapid growth in the past 20 years. That growth is now often described in turn as a kind of conspiracy against good government because the entitlements -- not the word most Americans would apply to their benefits -- are so seldom reviewed.
A little of this negative view of the benefit programs, which after all are not just costs, but income to large sectors of the population, crept into a speech the other day by OMB director Richard Darman. He celebrated the vital deficit reduction agreement that he helped to produce between the president and Congress in part on grounds that it was "the first comprehensive reform and restructuring of middle-class 'entitlements' ... the largest portion of the budget, previously though to be untouchable."
But two things are wrong with this portrait of events. First, not all entitlements are created equal. The entitlements section of the budget is dominated by Social Security and Medicare. In the 1980s especially, it was these two giant programs for the elderly, which together represent nearly 30 percent of the budget, that mainly drove up the cost. The distinction between entitlements and discretionary programs is in part a euphemism for the rise in aid to the elderly that has occurred in recent years.
The second point is that, for all their reputation as untouchable, the major entitlements have almost all been well worked over in the 1980s. Where their costs have continued to rise, it has been in spite of that. Social Security was substantially reformed in 1983, such that benefits are now partly taxed and the normal retirement age will rise to 67 in the next century. The hospital part of Medicare was reconstituted in the same year; the government took away from the hospitals the power to decide what they would be paid. A similar step has now been taken in the Part B of the program that helps pay doctor bills; other cuts have been made in both parts in the interim.
The civil service and military retirement systems were both restructured prospectively two Congresses ago to make them leaner. The housing programs for the poor have likewise been thinned out, and in real terms both unemployment insurance and welfare benefits have been reduced.
It's not that there's no more to do. The better-off elderly, for example, should be made to bear a greater share of Social Security and Medicare costs by making more benefits taxable and/or, in the case of Medicare, pegging Part B premiums to ability to pay. It was precisely from needed steps such as these that framers of the latest budget agreement violently shied away. But no one should think that entitlements as a sector of the budget have gone without at least some reform.