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Can Entitlement Reform Squeeze Its Way into the Grand Bargain?

Sen. Ron Johnson warns “we’re past the point” where Americans get back what they contributed to Social Security.

by
Rodrigo Sermeño

Bio

October 11, 2013 - 12:31 am

WASHINGTON – The upcoming debt ceiling battle promises to bring entitlement reform back to the fore, even if political rhetoric threatens to ultimately overshadow serious talk about sweeping changes to entitlement programs.

House Speaker John Boehner (R-Ohio) said recently that getting the House to agree to raise the U.S. debt ceiling would only come with a bipartisan deal to make cuts and cost-cutting changes to entitlement programs.

President Obama and Democrats want Republicans to back additional tax revenue as part of an entitlement-reform deal; Republicans respond that they have already let taxes rise on the rich and now is the time to control spending.

Entitlement programs, which largely comprise the government’s mandatory spending, refer to programs such as Social Security, Medicare, and unemployment compensation, and programs for low-income individuals and families, such as Medicaid and the Supplemental Nutrition Assistance Program.

Currently, about a third of the federal budget is actually appropriated, coming under some level of congressional control. This part of government spending is known as discretionary spending. The law specifies some eligibility rules for the remaining sixty-six percent of the budget, which means Congress cannot decide each year how much money should flow to any of the entitlement programs unless it changes the laws mandating such spending.

Sen. Ron Johnson (R-Wis.), an outspoken budget hawk and member of the Senate Budget Committee, said “we’re past the point” where Americans get back what they contributed to Social Security. Meanwhile, the government pays out more in Medicare benefits than every dollar it receives. This makes both programs unsustainable and the main driver of a ballooning debt burden, the senator said at an event on entitlement reform hosted by the U.S. Chamber of Commerce.

“In the ’60s, you had 68 percent of the budget coming under some level of congressional control,” Johnson said. “If we don’t come to terms with our problem, in ten years only 24 percent of the budget will be appropriated, with 76 percent on autopilot. I come from the private sector. If you ran your business like this…that business would be bankrupt in no time.”

Earlier this year, senior White House officials told a group of Senate Republicans in a meeting behind closed doors that Medicare needed an overhaul. But in public appearances, the president has sounded a completely different message, Johnson said.

“Publicly, the only thing the president has said is that Medicare needs modest reforms,” he said. “We’ve got a program that spends over $575 billion, and in about 10 years it will be over one trillion dollars, one dollar going in, three dollars going out. That’s a program that needs more than modest reform.”

Johnson said that part of the problem in reining in spending, reforming entitlement programs, and other issues facing the federal government is that the government has grown so much in recent decades that lawmakers can no longer manage it.

“The federal government was never intended, it’s not designed, and it’s not capable of running 23 percent of the economy much less the 34 percent that we’re in the trajectory for,” Johnson said.

At the same event, Mitch Daniels, former Indiana governor and current Purdue University president, said government spending on Social Security and Medicare leaves less money for such things as university research, which, in turn, hurts economic growth.

“Investments in basic research on university campuses is a major driver of the innovation we need to grow as a nation, but it’s being squeezed by entitlements,” Daniels said. “Only a hundred years ago, the federal government was 2% of our economy. It’s grown steadily to about 23% this year, but the problem is the trajectory to 39% in thirty years.”

Daniels said that those who do not need Social Security, such as the very wealthy, should do without. He proposed increasing the age of eligibility, but not for those who already are receiving benefits, or for those who are close to retirement.

At the same time, Daniels says those older Americans need to help find a solution and take the financial burden off the backs of younger Americans. He admits the problem is serious, but there is a way to fix the situation.

“We are still above water. We do have the opportunity. We don’t have to dream that we can somehow do it all at once. We don’t have to do that. Maybe we start with a few changes that people can absorb and understand,” Daniels said.

Both Daniels and Johnson think part of the problem is people have been misled to believe they are only taking out what they put into the system. They say the truth is Americans are taking out much more, at the cost of future generations.

“They think it’s their money that they put in a little box somewhere, and they’re just getting their own back, when in fact they’re getting huge multiples of anything they put in there,” Daniels said.

The president included some cuts to Medicare and Social Security in his 2014 budget proposal, hoping to bring Republicans to the table and negotiate a “grand bargain.” The president’s budget, however, failed to convince Republicans that the White House is serious about entitlement reform, while at the same time angering some Democrats for even considering any sort of cuts to entitlement programs.

In spite of talk of reform as part of the budget ceiling negotiations, reforming entitlement programs still means very different things to Republicans and Democrats, and the two sides remain far apart on how to deal with Social Security and Medicare reform.

House Republicans have repeatedly voted to turn Medicare into a voucher-style program, but only for Americans younger than 55, such that younger generations would be subsidizing baby boomers. So far, Democrats have avoided talking about making any major changes to Medicare.

In 2011, Sen. Ron Wyden (D-Ore.) infuriated some fellow Democrats by teaming up with Paul Ryan (R-Wis.) to write a Medicare reform plan. The senator eventually distanced himself from the proposal, after 2012 presidential candidate Mitt Romney used it to tout Ryan’s willingness to reach across the aisle.

The president has been criticizing Republicans for not talking about entitlement reform and instead focusing on defunding the Affordable Care Act.

“They are not talking now about spending cuts,” Obama said. “They are not talking about entitlement reform. They are not talking about any of that. Now they are talking about something that has nothing to do with the budget.”

The Congressional Budget Office (CBO) said that U.S. public debt will increase to 100 percent of the nation’s GDP in 25 years if no action is taken to stabilize it. Near-term deficits are shrinking due to revenue growth from a recovering U.S. economy and a January tax increase on the wealthy, but this is not enough to overcome the costs associated with the aging baby boomers.

The CBO also warned that if Congress does not take any action entitlement spending would increase to 14 percent of GDP, or twice the average over the last 40 years, and the annual deficit would grow to 6.5 percent of GDP by 2038.

Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee, said the CBO’s report should serve as a call to action to take up meaningful structural entitlement reform as a part of the debt ceiling negotiations.

“The White House would like the world to think that the nation’s debt isn’t a problem – when, as CBO says, our debt, fueled by the rapid growth of our entitlement programs, is on an unsustainable path. The White House would like everyone to believe that we just need a little more revenue, when CBO found that revenue will be higher than it’s been over the past four decades,” Hatch said.

Rodrigo is a freelance writer living in Washington, D.C.

Comments are closed.

Top Rated Comments   
I resent, mightily, people keep picking on MC and SS. I've been paying into MC my entire working life. And, according to my SS statement, approx. $200,000.00 with my payments and my (various) employers. Also paid into unemployment, but have never needed to use. The fact that the US governments over the years have chosen to steal that money, is surely not my fault. Just give me the money's I contributed and I will take care of it. I also, now pay, $105.00/month for MC part B coverage; so it's not FREE, either. Yes, the programs need to be adjusted, but don't pick on me.
46 weeks ago
46 weeks ago Link To Comment
Sen. Ron Johnson warns “we’re past the point” where Americans get back what they contributed to Social Security.

Yeah, because you a$$holes spent it elsewhere.
46 weeks ago
46 weeks ago Link To Comment
Taxes are supposed to exist to benefit those of us who pay them. Maybe they can quit messing with all the money we've paid into SS and Medicare and instead stop paying out alms to the muslim brotherhood and everybody else in the world.
Take care of this country first.
46 weeks ago
46 weeks ago Link To Comment
All Comments   (15)
All Comments   (15)
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I've a choice with my company (as has been the case the last 2 companies I've worked with.. I'm a private contractor) to pay SS whereas I always opt out. Instead maxing out with my company matching the annuity.

I'm 38 and my then-4th grade public school teacher told us kids to spend, invest our money wisely. For MC and SS will more than likely be drastically streamlined or gone altogether when we reached obtainment age.

Greatest advice from a public sector union stooge I'd ever gotten!

For those boo-hoo'ing or expecting, demanding 'changes to entitlements you've paid into for..' - are you serious?

It's the Federal government! Did you really think the SS and MC program was on the up and up?

Do you really think then-CiC Clinton and GOP had balanced budgets.. with a 'surplus' to boot? They'd raided the SS chest.

'Don't be so gullible McFly'.

SS, MC was, is a Ponzi Scheme. Between the government leaving IOU's in the SS chest and senior citizens living longer and using on average 3x more than they'd paid into the Ponzi scheme.. you folks are shocked and awed by the government punishing/ taxing those senior citizens with more shekels?

Wow.

Read up on what Jefferson said.. no forewarned about government having the power to '..give..'.

Now that these 'benefits' you're eligible for are looking more sparse and doctor's aren't in the business of working for free or paying you when you visit.. you're crying foul?

I may be coming off as callous but really.. Tour blinded, naive trust in the Fed has me think of the line from the flick Animal House, 'You fu---- up you trusted us'.

Seriously politicians have warned us for centuries of government's unkept promises.

The-late Barry Goldwater spoke of inasmuch in the early 60's.. BEFORE Medicare was law!

Hey My folks are in their 80's and my old man, a Korean War vet isn't in the best of health. Though he wasn't a sucker and told his kids to invest and/OR stick with a company to get a decent pension.


46 weeks ago
46 weeks ago Link To Comment
The greatest generation did a great job feathering their nest. The rest of us get to pay for that self directed generosity. Every Social Security statement should include the total paid in to the account as well as the accumulated payouts for SS and Medicare. The greediest generation.
46 weeks ago
46 weeks ago Link To Comment
Does anyone actually believe that our current GOP leadership can even put a dent in the entitlement leviathan? It is to laugh. It is up to US, a very pissed off American People, to effect change. Vote the self-serving bums outta there! We must make our demands known.
46 weeks ago
46 weeks ago Link To Comment
Ron Johnson? The guy who screamed at Ted Cruz for trying to defund Obamacare? Why would we follow HIS advice on entitlements reform? Yeah, Medicare is bankrupt and the Social Security "lock box" is devoid of cash and stuffed with IOUs. And now we're having a NEW entitlement -- one that dwarfs all others -- shoved down our throats. And what is Ron Johnson doing about it? Nothing. And him to the list of gutless GOP senators who need to be removed and replaced.
46 weeks ago
46 weeks ago Link To Comment
I resent, mightily, people keep picking on MC and SS. I've been paying into MC my entire working life. And, according to my SS statement, approx. $200,000.00 with my payments and my (various) employers. Also paid into unemployment, but have never needed to use. The fact that the US governments over the years have chosen to steal that money, is surely not my fault. Just give me the money's I contributed and I will take care of it. I also, now pay, $105.00/month for MC part B coverage; so it's not FREE, either. Yes, the programs need to be adjusted, but don't pick on me.
46 weeks ago
46 weeks ago Link To Comment
tJust try buying an immediate annuity with that $200K and you will see how rich SS benefits are. The benefit far exceeds the amount paid in especially for tthose now on the take.
46 weeks ago
46 weeks ago Link To Comment
"would only come with a bipartisan deal to make cuts" Actual cuts or just more reductions in the increase kind of cuts? What say you Boehner?
46 weeks ago
46 weeks ago Link To Comment
There will be no entitlement austerity with Democrats in control of the Senate and Barry Soetoro warming the Presidents seat.

Get real.

We couldnt even get it with Republicans in control of both houses of Congress and the Presidency.

The only way we are going to get it is by replacing RINOs with real conservatives and getting control of both houses of Congress and the Presidency. You know like Sarah Palin.
46 weeks ago
46 weeks ago Link To Comment
I'd just like to stop the lie that all that SS money being stolen from me is ever going to benefit me in any real way. It's not, and despite what anyone tries to tell me I know I'll never, ever see it again.

It's just too bad that about 95% of my generation still believes the lie that it's all right there waiting for them.

We have to stop this charade and make some real changes or the catastrophe is going to wipe out everyone, not just the stupid people who believe everything will roll on like it always has forever.
46 weeks ago
46 weeks ago Link To Comment
Social Security was set up as a Ponzi Scheme to transfer wealth from young people to old from the get go, kind of like Obamacare.
46 weeks ago
46 weeks ago Link To Comment
Sen. Ron Johnson warns “we’re past the point” where Americans get back what they contributed to Social Security.

Yeah, because you a$$holes spent it elsewhere.
46 weeks ago
46 weeks ago Link To Comment
Taxes are supposed to exist to benefit those of us who pay them. Maybe they can quit messing with all the money we've paid into SS and Medicare and instead stop paying out alms to the muslim brotherhood and everybody else in the world.
Take care of this country first.
46 weeks ago
46 weeks ago Link To Comment
@dogula, AMEN.
46 weeks ago
46 weeks ago Link To Comment
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