If you are concerned about the inexorable growth of entitlement spending and want to cut federal deficits, there is an obvious first step: Repeal the $60 billion per-year Medicare drug benefit, Part D, and eliminate the Medicare Advantage plans that give some Medicare recipients higher benefits than others at an additional cost to the Treasury of about $15 billion a year.
These two cuts alone will reduce deficits by at least $750 billion over the 10-year planning horizon used by House budget chairman Paul Ryan or $900 billion over the 12-year frame President Barack Obama prefers.
If you recoil from these suggestions, but are one of the people who have been calling for lower taxes, lower deficits and smaller government, my counsel is simple: Shut up! Abolishing these two entitlements is the most concrete step the nation could take to give you exactly what you have been asking for.
Harsh words? Yes, but there has been so much demagoguery, so much willful fostering of self-serving misinformation around fiscal issues that we are not going to solve these problems without someone’s feelings getting hurt.
People have to face realities. But based on the number of emails I get from people who believe that we could balance the budget by cutting foreign aid (0.6 percent of federal outlays) or curbing federal employee compensation (all civilian personnel costs come to less than 5 percent of outlays), it is clear that self-delusion still is rampant.
Why choose these two programs? First, they are new. If people are dead-set against the government creating new entitlement programs, then why not eliminate these recent ones on a last-added, first-abolished basis?
Medicare drug benefits are just past their fifth birthday. Many people did just fine without the benefit. Indeed, studies showed that paying drug bills posed serious problems for less than 15 percent of Medicare beneficiaries. But most of the rest naturally have been glad to slurp free gravy offered to them.
Moreover, Medicare Part D was a poster child for everything many find dysfunctional in contemporary politics. The political power of one well-organized group — Medicare recipients — pushed the program through Congress. It had broad bipartisan support, although George W. Bush made at least token efforts to keep the candy store from being given away. But the attitude of its proponents paralleled that of farm organizations on ethanol and crop subsidies: We have the political muscle, we understand the process, we want to take this money from other taxpayers for our group’s benefit and we simply are going to do it.
The Medicare Advantage plans are a few years older, but still fall into the category of recently added entitlements. They now cost an additional $14 billion a year, nearly as much as outlays for the much-derided Temporary Assistance for Needy Families program that is still known to many as “welfare.”
It is true that, in the past three years, outlays for older programs like the Supplemental Nutritional Assistance Program, or SNAP (formerly called Food Stamps) and unemployment compensation also have risen sharply. But increased spending for SNAP stems from more people meeting existing criteria due to the sour economy, not from any major expansion of benefits. If unemployment drops, outlays on SNAP will return to more usual levels.
The same is true for unemployment compensation. New claims will fall if the economy recovers. The initial 26 weeks of coverage is statutory. Anything beyond that, including the extensions of up to 99 weeks of coverage in force at times during the past three years, depends on congressional action. If Congress does nothing, outlays will drop.
So if you are looking for new, big entitlement programs enacted because a special interest group had the power to wrest money for itself from the rest of society, you are talking about Part D Medicare and Medicare Advantage plans.
Moreover, both were enacted without Congress, or the Clinton and Bush administrations, doing anything to secure increased funding. There was no increase in Medicare or other taxes. It was just two more big items put on the nation’s credit cards.
There is also a fairness question. Other big welfare programs like Medicaid, food stamps or Supplemental Security Income, and even minor ones like the Women, Infants and Children program are means-tested. Unless your income and net worth fall below specified amounts, you don’t get the benefit. Medicare Part D and Advantage plans are not tied to need. Warren Buffett or George Soros is as eligible as some widow living on an $800-a-month Social Security check.
This is a litmus test. If you are all for curtailing entitlements, ending deficit spending and cutting taxes, but are unwilling to contemplate ending these two programs, then you are either very poorly educated about fiscal realities or hypocritical about defending your own benefits at the expense of the general good.
© 2011 Edward Lotterman
Chanarambie Consulting, Inc.