Entitlement reform is the key to our fiscal future. But many Americans don't understand how entitlements will shape the path ahead. ConservativeHome's Ryan Streeter asked AEI scholar Andrew Biggs, a well-known expert on these issues, three questions on the topic:
RS: Despite getting some decent media coverage lately, the subject of "entitlement reform" is lost on many, if not most, Americans. If there were three things you'd like every American voter to understand about our big entitlement programs - Medicare, Medicaid, Social Security - what would they be?
Biggs: First, I'd say that without rising entitlement spending, the federal budget would be more or less in balance over the long term. It might still be too large and too wasteful, but we wouldn't be facing a financial crisis due to rising debt. Our long-term budget challenge isn't 'waste, fraud and abuse,' nor is it benefits given to illegal aliens. It's benefits that we give to ourselves. That's what makes the problem so hard to fix.
Second, I'd point out that fixing entitlements doesn't mean throwing the poor out to fend for themselves. We could guarantee that no senior would live in poverty for about half of what we currently pay on Social Security. Likewise, we could guarantee that all future seniors receive medical care that's at least as good as what today's seniors receive. What we can't guarantee is ever-increasing levels of benefits and ever-rising expenditures on health care. At some point the growth has to stop.
Third, the solutions lie in changing the negative incentives contained in Social Security, Medicare and Medicaid. Social Security encourages people to save less and retire earlier. Medicare encourages people to consume health care without concern over cost-effectiveness, since the patient bears little of the cost. And Medicaid encourages states to expand the program, since Washington, DC pays most of the bills. All of these factors encourage waste. If we get the incentives right, we can preserve the quality of benefits that people need but at lower costs.
RS: Republicans say they'll include entitlement reform in their budget this spring. Let's imagine for the moment that they could propose reforms that would actually get enacted. What would you advise them to include?
Biggs: Research on how other countries have balanced their budgets shows that the path to success lies in reducing government spending, not in raising taxes. So we need to find a way to reduce costs without hurting the people who need help the most. Rep. Paul Ryan's Roadmap plan preserves the safety net but significantly reduces costs. Scholars at AEI have put together a number of distinct proposals that would do the same.
RS: And more down to earth, are there proposals you think stand a chance of bipartisan agreement?
Biggs: I doubt it. There is a fundamental disagreement between the parties regarding the path of government. Everyone agrees that, eventually, we need to balance the budget. But conservatives would like to balance the budget at historical rates of spending, while liberals want to balance it at much higher levels of spending. Compromise is technically possible, but unless President Obama truly leads on the issue -- which he's shown little inclination to do -- then it's very unlikely.