Let's get serious about Social Security, Medicare reform

2013-03-04T00:00:00Z Let's get serious about Social Security, Medicare reformJonathan Alter Bloomberg News Arizona Daily Star
March 04, 2013 12:00 am  • 

U.S. House Democrats have signed a letter urging President Obama to oppose any benefit cuts to Social Security, Medicare, Medicaid and other entitlements. That's the last thing we need.

To hold the line on harmful cuts to discretionary spending, Obama and the Democrats must educate the public about the necessity of entitlement reform. Otherwise, the poor and needy will get hit much harder down the road.

Liberals are right to reject Republican proposals that would slash social-welfare programs even as they refuse to consider closing tax loopholes for the wealthy. But they need to start talking seriously about how we will pay for the insanely expensive retirement of baby boomers.

How expensive? Anyone reaching retirement age in the next 20 years (including me) will take more than three times as much out of Medicare as he or she contributed in taxes. By 2030, the United States will have twice as many retirees as in 1995, and Social Security and Medicare alone will consume half of the federal budget, with the other half going almost entirely to defense and interest on the national debt. It's unsustainable.

If Democrats don't want to talk about these programs, they can say goodbye to every other pet program. We can preserve Medicare in amber only at the expense of investments in prekindergarten programs or cancer research.

To reform entitlements, we should assess what these programs originally were meant to do.

For starters, Presidents Franklin D. Roosevelt and Lyndon B. Johnson didn't call them entitlements. Jimmy Carter's administration borrowed the term from "Anarchy, State and Utopia," a 1974 book by Robert Nozick, a political philosopher. "Entitlement" sounds selfish and at odds with the dignity and peace of mind that Social Security and Medicare are meant to provide. It distorts the animating idea behind these programs, which is social insurance.

FDR didn't have strong feelings about benefit levels, retirement ages or eligibility standards. He focused on what he called guaranteed return. By that he meant that having paid into the system through a kind of insurance premium (though in fact it was merely a payroll tax), Americans should rest easy that some money would be there for them if they lived long enough to need it.

"Guaranteed return" and "insurance against need" should continue to be the two guiding principles of social-insurance reform. "Guaranteed return" means no privatization or voucher system for these programs. FDR would have strongly opposed President George W. Bush's plan to allow Social Security contributions to be invested in the stock market. He thought subjecting retirement income to what he called "the winds of fortune" was a breach of the social contract.

"Insurance against need" suggests keeping the focus on poor and middle-class recipients who depend on the money most. That means means-testing, giving wealthier retirees less. FDR, who favored high levels of taxation on the rich, would have been fine with taxing their benefits, too, as long as they were guaranteed to get at least something back.

Liberals generally oppose means-testing social-insurance programs.

For decades they've argued that if the wealthy don't get a heaping portion of Social Security and Medicare, it will undermine the political support of the programs and turn them into a form of welfare. Once that happens, the theory goes, the programs will be ended.

Like the word entitlements, this hoary idea should be retired.

Today, only the first $110,000 in income is subject to the 7.65 percent tax that pays for Social Security and Medicare. Lifting the cap to higher income levels (say $250,000 or $400,000) could eventually generate hundreds of billions of dollars.

Republicans consider this a tax increase. That's true only outside the context of these programs. The change could be structured so that no one paid in more than actuarial tables say they would take out. That would still raise billions and be consistent with the idea of paying for your own retirement if you can afford it.

Maybe there are better ideas for reforming social insurance. The point is, we better start talking about them. Otherwise, Grandpa and Grandma and their fellow Grateful Dead fans are going to eat all the food on the table.

Copyright 2014 Arizona Daily Star. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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