Our entitlement programs are growing in a way that hurts the poor and should offend conservative sentiments

Ryan Streeter

This begins the first of three posts on important elements in the debate about entitlements and spending that we hear too little about.

Conservatives have disagreed among themselves about the role of the state in fighting poverty, but they have typically agreed about two things.

1. Government should provide a safety net at some level for society’s neediest citizens. Conservatives have argued over the size of the net and the heft of its ropes, but nearly all believe the state should care for the basic needs of those who cannot care for themselves and whose needs civil society or the markets are not able to fully address. There are, of course, libertarians who don't share this belief, but for the most part, conservatives as a whole hold this view.
2. Dependence on government is ruinous over time to the recipients of state assistance. Except for aid to the disabled, elderly poor, and others afflicted with inescapable indigence, government assistance over time replaces aspiration and skews incentives to care for oneself and one’s family. This belief guided the successful welfare reform efforts of the 1990s.

These two beliefs – that government assistance should be targeted to those in need and delivered in a way that does not produce dependence – have long anchored conservative policymaking, even if conservatives have disagreed about how to apply them from time to time. As principles, they are fairly canonical in conservatism.

For this reason, it is astounding to think about conservatives’ relative silence on entitlement reform. I say “relative silence” because, until Paul Ryan’s solo flight into the Medicare and Social Security storm clouds, the only conservatives talking about the issue were in a few random think tanks.

Why is the silence astounding? For two reasons, which correspond to the two beliefs I’ve just discussed.

First, entitlement programs’ growth has gotten to a point where we as a country target more resources to the middle class and even affluent than we do to the poor.

Now, a conservative might argue that our safety net programs for low-income Americans are already too bloated as they are, regardless of how much of the budget they account for. But the point is that more and more taxpayer dollars are going to more and more of the population that has little to no safety net needs, leaving less over time for the truly needy. 

Take a look at these pie charts from the Peterson Foundation.

 

The blue slice of the pie is the one out of which safety net programs are funded (and they represent only a fraction of that slice, as discretionary spending is all of the government’s spending save entitlements and interest). The red slice of the pie is our entitlement spending.  Over time, resources for those in need will be overwhelmed by spending on people with less need.

The current trajectory of social welfare funding (and let’s be honest, that’s what Medicare and Social Security are) flies in the face of the conservative belief about safety net spending. Aside from the sheer cost of these programs, which is increasingly agitating conservatives and finally getting public attention, their proportion of federal spending is very unconservative in principle.

One might argue that saftey net spending within the blue slice of the pie is still growing unjustifiably in some programs, but that is not the point here. The important takeaway is the entire picture. The 2040 pie chart above shows who we are letting ourselves become as a nation.

Second, as entitlement programs have swelled, we have effectively been promoting dependence among the middle and upper classes at the expense of lower income workers.

Low-income workers, even if they pay no federal income taxes, are still paying 7.65% of their income in payroll taxes to support Medicare and Social Security beneficiaries (5.65% this year because of the December tax bill compromise), the majority of whom are much better off than the workers. A millionaire friend of a friend of mine was bragging last week at a dinner party that the federal government recently footed the bill for his recent knee replacement. The injustice in that should be self-evident.

As we were busily reforming welfare in the 1990s to reduce dependence among the poor, the amount of money we were spending on middle and upper class dependency through Medicare and Social Security was rising. It’s set to skyrocket in coming years.

Now, one might say that our more affluent seniors are not really dependent in the same was as the poor. But I’m not so sure.  Why else have lawmakers been so timid about reforming the programs? They know they’ll be met with a barrage of “Don’t touch my benefits” calls, most of which will come not from the poor but from people in the middle class. If government benefits reduce personal savings and inhibit responsible decision-making about health care usage, that looks an awful lot like dependency to me.

Conservatives have finally started broaching the topic of means-testing – that is, not allowing Medicare to pay for a millionaire’s knee replacement. But by and large, they are still pretty silent on the topic, and you never hear anyone take this on as a matter of – I’ll say it – social justice.

Having the federal government pay burgeoning social welfare costs for upper middle class people should offend conservative sentiments much more than it does.

We are long overdue to push means-testing as a policy into our entitlement programs, and hopefully we're getting to a point where the public is ready for it. As Stephen Hayes writes in the current Weekly Standard, it's remarkable that a potential 2012 GOP presidential candidate, Mitch Daniels, got specfic enough in a recent speech to suggest means-testing and other entitlement reform ideas.

This is progress indeed, but none of us should underestimate just how "unjust" means-testing will strike a good many Americans, including many conservatives.

Comments

[Richard Knight]

"Government should provide a safety net at some level for societies neediest citizens." This philosophy appears just, sensible and even noble. Why shouldn't we help those who are unable to help themselves? There is unquestionably a percentage of the population who, through no fault of their own, cannot sustain employment or fend for themselves.

But where do we draw the line? What is the measuring stick? Who makes the decision in the field to approve or not approve an individual or family?

I know guidelines are determined and field workers are trained and bureaucracies are thus established. However, sooner or later everyone finds out the rules of the game and the race is on to exploit the loopholes. There are too few monitors and the opportunites for fraud are too great.

Even implementing 'Means Testing', which I am not against per se, does not end the fraud. Those with the means will always be able to find a loophole. They can afford to engage attorneys and accountants who will ensure they stay within the 'Means Testing' parameteres, and yet preserve their own coffers.

In a 2004 Issue Brief on the Subject of Means Testing, The American Academy of Actuaries (http://www.actuary.org/pdf/socialsecurity/means_0104.pdf) asked the following:

Would the profound change in philosophy that 'Means Testing' represents weaken public support for the program?

How would such a change alter the balance between individual equity and social adequacy?
Would other factors reduce the expected financial gains from means testing?
How would means testing be administered?
Are there other ways for achieving a similar degree of savings without changing the current program structure?

While means testing could achieve significant reductions in Social Security expenditures, it would represent a change in the underlying principles of the program. Before giving serious thought to means testing of Social Security benefits, Congress should consider the following questions:

Should the Social Security program be modified making it a more traditional government welfare program? Could Social Security even survive such a fundamental change in its underlying philosophy?
What would be the true savings (if any!) to the Social Security program if some form of means testing were adopted? What would direct savings from lower benefit payments be largeley eaten up by indirect costs, such as lower productivity, legal or illegal avoidance of benefit reductions, and highere administrative costs?
Are there alternatives that could have similar results to means testing while remaining within the current structure?

Personally, I believe the issue of entitlements is an even deeper problem. Human beings are essentially self-centered creatures (e.g. your millionaire refusing to use his own funds for his knee replacement). Individualism is rampant and entitlement is deeply ingrained. Everyone will take what they can get.

At the end of the day, it is a question of morality. If we are not governed with a morality that comes from within to behave in a responsible, other-oriented manner, no amount of outward legislation will change our behoviour. I'm afraid it will only re-dirrect the flow of selfish behaviour.