Thursday, April 11, 2013

Why I No Longer Support Entitlement Reform

(Washington Post)

I've long favored an approach to long-term deficit reduction similar to what President Obama has proposed: a mixture of entitlement reforms, revenue increases (ideally through reforming the tax code), and phased-in spending cuts. Of course the devil is in the details and I'd leave it to the wonkiest of wonks to determine what reforms, cuts, and revenue increases will give us the biggest bang for the buck - keeping the effective subsidies and tax breaks and eliminating the pointless giveaways to corporations. But as long as the eventual agreement was in that framework, I'd probably support it.

I'm not exactly sold on the President's negotiation skills, but nevertheless his proposal is basically a flavor of the Simpson-Bowles proposal that all of the Very Serious People in Washington claim to support. This is the sort of compromise that a sane, functional center-left party and a sane, functional center-right party would eventually agree to.

OK, you can stop laughing now since what we have is a sane, functional center-left party negotiating with an insane, dysfunctional far-right party. The Republican party will not agree to any deal that increases tax revenues. And I'm not sure they even want to really cut entitlements given the graying of their base.

It's a problem when 70% of the budget is being spent on health care for old and poor people, retirement benefits for old people, and the military. It doesn't leave a lot of room to do anything else we desperately need to do. But it's pointless for the Democrats to try to reach a balanced agreement at this point because in the long-run they will just be digging their own graves.

Let's consider the likely effects of a "balanced deal":

1. The President would get some good short-term coverage by the VSPs over the "grand bargain."

2. The President and the Dems would then propose to use some of the new savings and revenues to make investments in the economy. Republicans would likely not agree to pass any of these proposals. They will want to use all of that to reduce the deficit so they can do #4 eventually. If amazingly the GOP did agree to this new spending, it would be ultimately be cut as part of a deal in #4. Then Dems will have gotten nothing in the long-term for the entitlement cuts other than a short-term pat on the back from the VSPs who are always wrong.

3. Republicans would then shamelessly rile up their base over "Obama's entitlement cuts", even though they were voted into law by many of their members, to win more seats in the 2014 midterms.

4. When Republicans eventually take back the White House they will enact a huge budget-busting tax cut again. That's what they always do. That's why the party exists at this point.

5. Then in a half-decade or decade later when Democrats are forced to clean up the budget mess yet again, Republicans will insist we don't have a revenue problem, we have a spending problem, even though the only major thing that will have changed in the preceding years was a huge tax cut. The VSPs will not acknowledge that history and will still demand a balanced deal. So the Democrats will seek a balanced deal to reform entitlements again and cut more spending again, with some minor tax increases that will eventually be rolled back and then some.

..... Go back to Step 1, rinse, and repeat. This is like a negotiation with a savvy child over a toy or a dessert. Are Republicans still going to clean their room first when they know they will eventually get the toy or dessert anyway if they just hold their breath long enough?

And this cycle will seemingly continue forever thanks to gerrymandering, Democratic voters not turning out in big enough numbers for midterms, and ticket-splitters sending mixed signals. So other than for the good press over a "grand bargain", what exactly is in it for the Democrats to agree to a balanced deal right now?  Much like Obama's proposal to avoid the sequestration cuts, there seems to be way more for the Republicans to like in these deals than the Democrats, yet the Republicans are the ones most vociferously refusing to negotiate, with the sticking point being tax revenues.

If we need to cut entitlements now to avoid the big budget problems in 15-20 years which will need to be solved by.... (wait for it)... entitlement cuts, why not just wait 15-20 years and see how the budget looks at that time? Give ObamaCare a few decades to see if it can contain the rate at which health care spending is eating up the federal budget. If in 20 years, we really do have a serious debt problem, just enact the same entitlement cuts then. In the meantime, those proposing entitlement cuts seem like they have a solution that is a seeking a problem.

Republicans ideologically want to cut entitlements, but functionally have a difficult time doing so now without a lot of cover, since they are so dependent on older voters to win elections. Democrats are willing to give them that cover and they still won't take it. Also, putting off cutting entitlements until there is actually a real debt crisis would put everything on the table and would likely mean it will be easier to increase taxes as part of a deal at that time. For instance, helping to save Social Security by extending the payroll tax so it hits more of the income of richer people would probably poll at about 99% support if we reached a real crisis. Whereas now it's not even part of the discussion, which is a huge victory for Republicans.

So, for all these reasons I can no longer support entitlement reform, at least not right now. If someone can convince me that we will have both a sane center-left party and a sane center-right party negotiating in good faith to solve a genuine debt crisis that is in need of fixing immediately, I'll think about it. Good luck.