With the passage of the tax reform bill occurring just before Christmas, the American people have been given a gift of extra money at the end of the month. This present is a bit like the socks you get from your aunt on Christmas morning — as a child, you do not appreciate it and want a cool new toy, but as you get older and more mature, you wish you did not have to buy your own socks anymore. After the New Year, Congressional Republicans have the opportunity to continue on the train of fiscal conservatism, and actually pursue significant entitlement reform. If the GOP does not enact any changes on entitlements soon, they may not get another chance to do so, given the predicted surge in Democratic victories in the upcoming 2018 election season.
Spending on Medicare, Medicaid, Social Security, and other social insurance programs took up over two-thirds of all federal government spending in 2016, and this is a problem that has only worsened over the years. With no possibility of cutting gluttonous military spending on the table under the current administration, entitlement reform seems to be the only way to return to a state of fiscally responsible governance. For too long, politicians in Washington have been blowing out the debt with lucrative entitlement spending, and have been leaving future generations to deal with the delayed consequences, such as reduced savings and wages, and reduced ability to maintain spending on programs that people depend on for their survival.
Our founding fathers never envisioned such an expansive state, wherein the federal government is solely responsible for the material well-being of the public, and where publicly funded benefits turn from extra comfort to entitlements that are necessary to maintain one’s own survival. The goals of welfare should be to help people get back on their own two feet so they can provide for themselves, and to help those who are unable to help themselves. In practice, however, many of these welfare programs created intergenerational dependency since the War on Poverty began in the 1960s. Is it truly compassion to have people reliant on a bloated and corrupt government in order to stave off abject poverty? This goes against the grain of the very concept of liberty and freedom that our country was founded on, a concept that is still relevant but is understated in our society today.
Due to the short-sighted nature of the US political system, however, it is unrealistic to start this conversation from the premise of “why do these programs even exist in the first place?” So with that being said, it is necessary to understand the fiscal drain that many of these programs have on the country, and more importantly, that these entitlement programs often do significant harm to the people they are attempting to help. Understanding this, we can propose reforms that move the needle in the right direction, towards the ultimate end of advancing liberty and fiscal responsibility.
Medicaid, the medical insurance welfare program for low-income Americans, is a detriment to its recipients because it does not enable them to enter the private market for health insurance, a market which sees superior quality of care and health outcomes. People on Medicaid see overall health outcomes that are no different to those who are uninsured. Medicaid also has far lower reimbursement rates than Medicare or private insurance, so fewer doctors are accepting new Medicaid patients. This limits options of care for those who need it most. There is also evidence that Medicaid has significantly contributed to the opioid epidemic. Medicaid expansion that occurred as a result of The Affordable Care Act has also crippled many state’s budgets. The expansion should be stopped, and block grants should be issued to states in order to streamline federal spending on these programs. Block grants will allow states to use the money so they can fit the needs of their states individually, and will put Medicaid spending on a budget. This will relieve the current burden on taxpayers and will increase quality of care.
Medicare, the medical insurance welfare program for seniors, is a complete disaster in terms of health outcomes and fiscal drain. Medicare is also rife with, as President Trump puts it, “waste, fraud, and abuse.” In 2014, approximately $60 billion in Medicare funds were wasted, spent improperly, or were spent through fraud. Despite this fact, the amount of spending on Medicare has increased since 2014. A study from the Journal of the American Medical Association on health outcomes for Medicare beneficiaries found that “for 16 of 40 necessary care indicators (including preventive care indicators), beneficiaries received the indicated care less than two thirds of the time.” Health outcomes for patients on Medicare were — like those on Medicaid — worse than those for people who had private insurance.
Not only does Medicare not help who it says it will, it is a massive fiscal drain on the country. Medicare contains $43 billion in unfunded liabilities (currently unavailable funds needed to pay for promised benefits), and along with Medicaid and Social Security, contains over $126 billion in unfunded liabilities when the three programs are added together. In addition, the average amounts paid in taxes towards Medicare and Social Security are far less than the benefits each beneficiary receives. In other words, these programs are on an unsustainable path. Medicare and Social Security are operating at a loss, and this will only get worse without significant reform. The consequences of this kind of fiscal irresponsibility are ominous to say the least, including stagnant economic growth, depressed wages, and an inability to provide benefits for those who need them most.
One of the most popular government programs, Social Security, is another leg on the same chair of fiscal irresponsibility and incompetence. Without significant reform, Social Security will be fiscally insolvent, or bankrupt by 2034. According to the Congressional Budget Office, immediate increases in payroll taxes, cuts in benefits, or some combination of the two will need to occur in order to save the program. The Social Security Disability Insurance (SSDI) program is on course to become fiscally insolvent by 2021, and the Old Age and Survivor’s Trust Fund (OASI) will be fiscally insolvent by 2030, as uncovered in the same study by the CBO. Because of the way Social Security is currently structured, it discourages people from working, and from saving privately. It also discourages people from having families, which contributes in part to decreased birth rates since the 1960s.
We can all agree that this is not the ideal system, so we must act now to transform the way we view Social Security. When first enacted, Social Security was designed to help people for only a few years, as reaching 65 years of age was a significant accomplishment when the program was created in the 1930s. Today, many live off Social Security for much longer than was ever intended, due to massive increases in life expectancy since the program was created. In order to transform our approach to Social Security, we should increase the retirement age to 70. This will encourage people to work, grow the economy, and reduce deficits, according to the Committee for a Responsible Federal Budget. In addition, allowing people to opt out of Social Security at a certain age will help maintain the fiscal solvency of the program, so future generations can actually reap the benefits of the programs they paid into.
Mitch McConnell has said the GOP will not be pursuing entitlement reform in 2018, but this is a grave mistake. Keeping the status quo on the structure of entitlements, as well as on spending, will only hurt Americans who are currently dependent on these programs for their survival. Whether it is enabling people to get private health insurance rather than go on Medicare or Medicaid, or encouraging people to invest money in private retirement funds, it is vital that we enable people to gain back their independence and allow them to provide for themselves.
This country was founded on the ideas of liberty, freedom and personal responsibility, not on the idea that it is the federal government’s responsibility to provide a comfortable safety net that often operates more like a web. The GOP establishment has angered many conservatives and lovers of liberty alike through deserting the conservative movement in favor of corporatism and lukewarm neoconservatism. This is part of what fueled the move in the GOP away from the conservatism of William F. Buckley or Barry Goldwater, and eventually into the path of Trump-style populism. The diminution of conservatism and constitutional principles only helps Democrats win, because deserting this comprehensive philosophy while trying to promote fiscal responsibility only makes Republicans appear to be callous and uncaring of the poor. Republicans are seen as people who accept the same liberal principles about the government’s duty to provide material well-being, but promote the slashing of government spending because they are simply not willing to spend enough to provide for the poor.
Entitlement reform is exactly what is needed in 2018 to promote the GOP’s return back to the party of true conservatism and liberty. This process began with the appointment of Neil Gorsuch to the Supreme Court and with the passage of an albeit imperfect tax reform bill at the end of 2017. Any lover of liberty should be encouraging policy decisions that promote the continuation of that trend.
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