Don't Count On a Debt Deal or a Tax Hike to Save Us. The Only Way We're Going to Keep America Great Is By Committing to Sacrifice
Well, America, we made it -- for the moment at least. The government did not shut down last week.
But we all known that even bigger fights are looming for us as we look ahead to the debate over raising the debt ceiling and the shape of the 2012 budget.
The most immediate benefit of Paul Ryan’s proposed budget last week was that it has gotten us talking about the trillions of dollars in debt and deficit spending that threaten our nation’s future. It makes the billions of dollars Congress has been fighting about in the current budget showdown seem small.
Pollsters and pundits are getting a lot of mileage out of the blame-game in the billion-dollar discussion we've been having. Who would have been most responsible if and when the government had shuts down? Republicans? Democrats? President Obama?
While it's easy to play the blame-game no one seems able to ask the more uncomfortable question in the trillion-dollar discussion: who do we blame if our economy shuts down in a couple of decades?
If we’re honest, we have to point our fingers back at ourselves. Our collective expectation that we are entitled to multi-billion dollar benefits such as Medicare and Social Security (known as “entitlement” programs for a reason) has been the main reason politicians have avoided reforming them – despite the fact that their insolvency poses an indisputable fiscal threat.
Our political will as a nation has been weak because our joint sense of entitlement has been too strong.
The hard truth is that WE have to change if we want Washington to change. That’s where we are as a society. It's disquieting, isn't it?
Ryan’s proposed budget starts pushing us in the right direction. While it leaves Social Security off the table, its proposed Medicare reforms, together with Ryan’s much-discussed Roadmap, show us where entitlement reform as a whole ultimately needs to go. The basics are as follows:
• First, we should expect that the wealthier we are, the less we’ll receive from the government. Multi-millionaires shouldn’t receive Social Security checks or have their knee replacements paid by Medicare. Scaling benefits to income is called means-testing, and we should all embrace it for entitlement programs. Ryan’s budget introduces means-testing into Medicare, which is a great start.
• Second, we should all expect to work longer before receiving government benefits. Raising the retirement age makes sense because we’re living longer than when the programs were designed. If you’re under 50, you should think about working at least until you’re 70 if you’re not wealthy enough to retire by then. Ryan’s budget doesn’t get into this, but any bipartisan entitlement reform effort will need to raise the retirement age.
• Third, we should get ready for the government to provide us with defined contributions rather than defined benefits.
Currently, the federal government pays Medicare and Social Security benefits, which are spiraling upward and out of control. Ryan’s budget proposes to provide future Medicare beneficiaries with a limited amount each year to purchase health insurance. The idea is that this will create a more competitive insurance marketplace, which will lower costs. Defined contributions in Medicare and Social Security are the future. We all need to get ready for this change.
Entitlement reform introduces some uncertainty into our lives. No one knows with utter certainty how much a defined contribution approach will slow the growth of medical costs, for instance. We do know with certainty, though, that the current path equals fiscal ruin.
Ultimately, reform requires that we save more, live healthier lives, work longer, and be prepared to get more involved in making decisions about the kinds of health care we receive.
All of this means that we need to change our expectations about how the government will provide for us when we’re older.
Whenever we have to forego something important that we expected to receive, we tend to call it a “sacrifice.” It’s not inappropriate to say that Ryan’s budget pushes us in the direction of “sacrifice” – even “shared sacrifice,” an expression entitlement reformers are loathe to use. Selling Medicare reform is hard enough as it is. Making it sound painful is even worse.
But changing our expectations, and preparing for a different future, is what we have to require of ourselves. Taxing our way out of the problem, a fiction many Democrats support, won’t work. Of the $3.9 trillion that some have bandied about as the amount raising taxes on the rich would produce for the government, $3.2 trillion comes from those earning under the $250,000 President Obama has defined as middle class.
In addition a recent study of 20 OECD countries over 40 years by Andrew Biggs, Kevin Hassett and Matthew Jensen showed that successful fiscal reforms consisted overwhelmingly of spending reductions rather than tax hikes.
Which brings us back to our main theme: sacrifice. If we are going to achieve the kinds of spending reductions needed to balance our books in the future, we all have to be prepared to give up what our parents and grandparents expected as a given. The only way we're going to keep our country great is by committing to sacrifice -- for the sake of our country. We've seen the sacrifices made by "The Greatest Generation." They came in the last century. Now, this is our generation’s greatest calling.
Ryan Streeter is Editor of ConservativeHome.com.