September 15 2011

You Can't Talk About Real Deficit Reduction Without Talking Entitlements

Carrie L. Lukas

Maybe this is another game of lowering expectations, just as occurred before the President made his "jobs" speech before the joint session of Congress, but the Wall Street Journal reports today that the much awaited deficit-reduction plan from the White House will " leave out changes to Social Security, and may exclude any increase in the Medicare eligibility age."

This isn't exactly surprising. It takes really courage to talk about making changes to the popular, but fiscal-train wreck, senior entitlement programs. And political courage isn't exactly what this President is known for (see for example, the recent jobs bill "paid for in full" by making Congress come up with some way to make the numbers work).

But this statement from White House spokeswoman Amy Brundage is a little jaw-dropping, even for this Administration:  "As the president has consistently said, he does not believe that Social Security is a driver of our near- and medium-term deficits."

Really? Perhaps the President should brush up on the information coming out of the Congressional Budget Office. Fortunately, CBO Director Douglas W. Elmendorf testified before the Deficit Committee this week. The testimony, while hardly a fun read, is worth considering in full. But here's just one section highlighting the gravity of the unique, dire fiscal calamity facing our country. And, no surprise, elderly entitlements are a big driver of it:

Under current law, spending on Social Security and the major health care programs-Medicare, Medicaid, the Children's Health Insurance Program, and insurance subsidies to be provided through exchanges in coming years-is projected to be much higher than has historically been the case, reaching 12.2 percent of GDP in 2021, compared with 10.4 percent of GDP in 2011 and an average of 7.2 percent of GDP during the past 40 years. Most of that spending goes to benefits for people over age 65, with smaller shares for blind and disabled people and for nonelderly able-bodied people.

I don't know just how short-term the President considers our "near- and medium-term" crisis, but news that in the next ten years, these elderly entitlement programs are projected to eat up another 2 percent of GDP, which is about 40 percent higher than our historical norm, seems reason that these programs deserve a little attention.

And the truth is, Social Security is a very straightforward program, and policymakers can easily identify the few ways that we can reasonable expect to bring down the programs costs. The only reason not to start on that process today is because it's politically fraught and far easier to kick the can down the road. Which is exactly what the President seems content to do.

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