Entitlement Spending: the Problem the Debt Deal Won't Fix

Last Updated Jul 31, 2011 10:08 PM EDT

It's easy when focusing on the play-by-play of the Washington mud-wrestling match over the debt ceiling to lose sight of the critical role of entitlement spending in determining the nation's fiscal and economic health for decades to come. A recent column in the Washington Post by Robert Samuelson is a reminder of just what's at stake and how critical it is to find a lasting solution to the mismatch between what programs like Social Security and Medicare take in and what they pay out - assuming they remain solvent and continue to meet their obligations.

Here's how Samuelson frames the issue:

"...Social Security, Medicare, Medicaid and other retiree programs constitute roughly half of non-interest federal spending. These transfers have become so huge that, unless checked, they will sabotage America's future. The facts are known: By 2035, the 65-and-over population will nearly double, and health costs remain uncontrolled; the combination automatically expands federal spending (as a share of the economy) by about one-third from 2005 levels. This tidal wave of spending means one or all of the following: (a) much higher taxes; (b) the gutting of other government services, from the Weather Service to medical research; (c) a partial and dangerous disarmament; (d) large and unstable deficits."
Samuelson goes on to point out that many retired people, contrary to popular belief, are not struggling to make ends meet and are living quite comfortably. He then proposes some form of means-testing for benefits:

"Our politicians make perfunctory bows to entitlement reform and consider that they've discharged their duty, even if nothing changes. We need to recognize that federal retiree programs often represent middle-class welfare. Past taxes were never 'saved' to pay future benefits. We need to ask the hard questions: Who deserves help and who doesn't?"
(Those questions don't seem to have been addressed significantly in the deal announced Sunday to raise the debt ceiling and reduce deficits. Early reports suggest that it contains little in the way of entitlement spending reform.)

Republicans will argue that contributions made to Social Security and Medicare were intended for, and even promised to, each citizen, much like contributions to 401(k) plans or private insurance. Samuelson points out, however, that the connection between an individual's payments into these programs and the benefits received has always been tenuous.

Click through to the next page for some modest proposals to bring entitlement spending under control.