Streams

Obama's Budget, the GOP Budget and Missing Entitlements

Tuesday, February 15, 2011

Mere hours after the release of President Obama's budget proposal Monday morning, Republicans and Democrats had put fresh paint on the battle lines, dug the trenches a few feet deeper, and offered a slew of arguments, statistics, and soundbites.

We all knew the noise machine would be loud. President Obama's budget is a $3.7 trillion adventure. House Republicans say that's exorbitant and irresponsible; they responded with a pre-emptive call to cut $100 billion from the budget they expected the President to release.

$100 billion sounds like an impressive amount of money, but when Republicans call it a spending cut, well, that's one way to look at it. Take $100 billion from $3.7 trillion, and all you're left with is the 2010 budget. There wasn't a budget for fiscal year 2011, and the Republican proposal wouldn't reduce spending from previous levels, but rather maintain them instead of driving them up. Even if they offered $100 billion in true spending cuts, taking the budget down to $3.5 trillion, that would still only be about a 3 percent reduction in spending. (Of course, it remains to be seen how successful the health care overhaul legislation will be in controlling costs in the coming years, so take this with a massive grain of salt.)

Neither President Obama nor Republicans are "cutting spending" in any meaningful areas with these budget proposals. For the coming fiscal year, Obama's budget singles out Great Lakes preservation efforts, heating assistance for low-income families, and other cuddly, relatively cheap items. On the other end, Republicans want to gut the EPA, deflate the Department of Education, and pull the plug on other cuddly, relatively cheap items. 

But even a cursory glance at this New York Times graphic shows just how little these cuts would mean to the big picture. If you squint, everything that's on the table for Obama and Republicans falls in the lower right hand quadrant. Health care spending, Social Security administration, defense expenditures, and interest on the public debt, those monoliths that make up the near-other 75 percent of the chart? Untouched, if not expanded from 2010 levels.

Where's that fiscal conservatism that's been all the rage since 2009? It's coming, House Republicans tell us, calling the $100 billion a "down payment" on their promise to cut spending. According to this Hill blog post, Majority Leader Eric Cantor said that the GOP's budget proposal, due later this spring, will finally tackle entitlement provisions in a meaningful way. That means figuring out a way to drive down the cost of programs like Social Security, Medicare and Medicaid, those whales on the government's ledgers. 

For people who take the issue of a ballooning budget and massive debt seriously, that should be welcome news. There's just one problem.

In the same Hill blog post, Rep. Paul Ryan, chairman of the House Budget Committee, is quoted as saying, "I can't tell you what our budget is going to be because we haven't written it yet," and that it's "premature to talk about what's going to be in our budget."

Except Paul Ryan has been loud and clear about what he'd like to see happen. His "Roadmap for America's Future Act" is a proposal that's been around since last year. It's even been in circulation long enough for the Congressional Budget Office to evaluate it and conclude that Ryan's plan would produce surpluses by 2080, whereas the current trajectory suggests deficits at 42 percent of GDP by that time.

So why aren't you hearing widespread GOP support for a proposal that would curb spending and cancel deficits? And why did Ryan dodge a question about what's going to be in the Republican budget proposal when he already has a massive one written?

Simple: Because his plan privatizes those entitlement programs. The CBO estimates that policies outlined in the "Roadmap for America's Future" would result in seniors purchasing less comprehensive insurance plans without paying any less (and sometimes paying more) money for them. Federal spending on health care would decline while individual spending would increase. From the CBO:

Beneficiaries would therefore be likely to purchase less comprehensive health plans or plans more heavily managed than traditional Medicare, resulting in some combination of less use of health care services and less use of technologically advanced treatments than under current law. Beneficiaries would also bear the financial risk for the cost of buying insurance policies or the cost of obtaining health care services beyond what would be covered by their insurance.

The cost of erasing deficits, then, would be a bump in personal spending on services once provided by the government.

Whatever the merits and weaknesses of such a proposal, privatizing these entitlement programs is not what Americans want to hear—much less phrases like "less comprehensive health plans," or "beneficiaries would bear the financial risk." In a 2010 Bloomberg Poll, 34 percent of those asked whether "Government-run programs such as Social Security and Medicare should be privatized," 34 percent said they "Strongly Disagree." Twenty-five percent said they "Mostly Disagree." Those who "Strongly" and "Mostly Agree" made up only 33 percent of those surveyed.

In other words, were the GOP to embrace Ryan's Roadmap, they expect it would effectively drive millions of voters into the waiting arms of Democrats, who will be more than giddy to spin Ryan's proposal as an insensitive, corporatist plot to balance the budget on the backs of the poor. Hence, Republicans' reluctance to trumpet the plan right out of the gate.

It will be very interesting to see what the GOP's budget looks like when it arrives in March or April. Could Republicans find a way to sell privatization? If not, how will they make good on their promise to control the cost of these entitlement programs? Alternately, will they just propose another $100 billion in cuts that don't address the big picture, but look great during an election year?

We'll have to wait to find out. The last time that one of the pillars of government spending underwent broad reform, it was dragged through the court of public opinion kicking and screaming. Months of vicious and polarizing debate took place before the controversial passage of the health care overhaul last year, and there continue to be efforts underway to repeal it or strike it down in court. Depending on the tack Republicans take with Social Security, Medicare and Medicaid, we could be in for one hell of a rerun.

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