Budget fix impossible unless elderly sacrifice

Judging by the political reaction, you'd think that Paul Ryan's budget takes a meat ax to Medicare and threatens economic havoc for the elderly. Just the opposite is true: The Ryan budget spares older people from almost any change or sacrifice — and that's the problem.

We have (and, to be fair, this is mainly the doing of Democrats and their intellectual apologists) made those 65 and over into a politically protected class, of which nothing is expected and everything is given.

It is impossible to have an honest debate about the budget — and government's size and role — unless this changes, because aiding the elderly is now the main thing the federal government does. If you remove that, fearing a backlash from the 50 million or so Social Security and Medicare recipients, you condemn yourself to bad choices: (a) you can't deal with deficits, which may crowd out productive investment and risk a financial crisis; (b) you must dramatically squeeze the rest of government, including the social safety net, defense and research; or (c) you must raise taxes sharply, which may further slow the economy.

Even now the magnitude of the problem isn't fully appreciated. Here's one indicator: Under plausible assumptions — including "full employment" and cutting defense and nondefense discretionary spending by a third — the Congressional Budget Office projects a deficit in 2023 equal to 6.75 percent of the economy (gross domestic product). To cover that, in today's dollars, would require $1 trillion in higher taxes; that's a tax increase of a third over the 1970-2011 average.

Let me now assert the customary caveats: At 66, I am not against older Americans; I don't want to dismantle Social Security and Medicare, which are vital parts of the social fabric; but I do want these programs modernized — to reflect longer life expectancy and the elderly's greater wealth; to lighten the burden on the young (whose taxes support these programs, because almost nothing has been "saved" to pay for them); and to protect government's other functions. Finally, it should be possible to discuss these issues candidly, without being accused of "throwing Grandma under the bus."

It isn't now. Democrats' relentless campaigns against Republicans as threatening to "destroy" Social Security and Medicare have succeeded at intimidation — and, curiously, Paul Ryan is proof.

There are two Ryans: what I call the good Ryan and the bad Ryan. Probably more than anyone in Washington, the good Ryan has highlighted long-term deficits' potential harm to our children and grandchildren. The bad Ryan has fashioned an unrealistic and undesirable budget by trying to accommodate both liberal dogma (don't cut Social Security and Medicare benefits) and conservative dogma (don't raise taxes). Any sensible plan must do both.

Governed by these constraints, Ryan's budget would:

(1) Impose no cuts in Social Security — that's 20 percent of federal spending off the table.

(2) Delay any major change in Medicare until 2023, when recipients could chose either a voucher plan or "traditional" Medicare — that's another 16 percent of spending unaddressed for a decade.

(3) Convert the federal share of Medicaid (federal-state health insurance for the poor) into a block grant to states, and then increase the grant annually at a lower rate than at present.

(4) Increase most other federal spending, including defense, only by inflation after 2023 — a formula that makes no allowance for population growth and could lead to "real" cuts because wages and compensation typically outpace inflation.

(5) Hold taxes at 19 percent of GDP after 2025, just above the 18 percent average of the past 40 years.

(6) Reduce deficits but not balance the budget until 2040.

This budget would have devastating consequences. Increasing non-Social Security and health spending only at the rate of inflation would gradually shrink most other federal programs. (From 2011 to 2030, these other programs would decline by more than half, from 12.5 percent of GDP to 5.75 percent, projects the CBO.) Defense cuts could verge on unilateral disarmament. States and localities would suffer, as the value of federal grants, including Medicaid, shriveled. The FBI, the National Institutes of Health and other federal agencies would be starved.

By contrast, the elderly would be mainly spared. One reason Democrats won't change Social Security and Medicare is that defending them is so politically rewarding. This, as much as Republican tax intransigence, underlies the stalemate.

The cliché is true: There are no painless cures to budget deficits. But all cures are unnecessarily hard and harsh because we maintain a protected class excluded from any solution.

© 2012 Washington Post Writers Group

Budget fix impossible unless elderly sacrifice 08/16/12 [Last modified: Thursday, August 16, 2012 6:36pm]

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