Entitlement Experts Urge Action to Defuse ‘Ticking Time Bomb’

Published February 21, 2011

With a new Congress sworn in and President Obama having submitted his budget for the next fiscal year, the nation’s focus must turn to solving the entitlement crisis that dominates more than 80 percent of the federal budget—or face fiscal ruin.

So say Rep. Devin Nunes (R-CA); Cato Institute Senior Fellow Dan Mitchell; former Congressional Budget Office Director and current American Action Forum President Douglas Holtz-Eakin; and Committee for a Responsible Federal Budget President Maya MacGuineas. They delivered that message at the National Taxpayers Union Foundation’s (NTUF) special event, “Moving Forward on Entitlements: Practical Steps to Reform,” at the Conservative Political Action Conference (CPAC) on February 11.

NTU Executive Vice President Pete Sepp moderated a session that featured these four experts as panelists. The overriding theme was that America’s entitlement commitments are so vast and mismanaged that they will crush the American economy under their weight if they are not reformed.

‘Crisis Is Here’
The Wall Street Journal’s Stephen Moore set the stage with his opening remarks, noting, “For years, we’ve been talking about the coming crisis. My message to you is the crisis is here.”

He stressed the generational divide on entitlements by pointing out a proposal to move from Social Security’s current benefit structure to one that includes a blend with personal retirement accounts is generally well received by younger Americans but opposed by older ones.

He illustrated the sheer immensity of the $3.8 trillion federal budget by presenting an analogy he uses with this son: “How many seasons would it take for LeBron James to earn one trillion dollars at his current annual income? Twenty-five thousand seasons!”

James last year joined the Miami Heat of the National Basketball Association after having spent seven years as a star player for the Cleveland Cavaliers. Moore’s analogy referred to James’s first few seasons, when he was paid about $4 million a year. His salary with the Miami Heat is reportedly $14.5 million.

‘Reform, or It’s Over’
Holtz-Eakin, the first panelist to speak, said, “If we do not reform my Social Security—the Baby Boomer generation’s Social Security—then it’s over.”

Holtz-Eakin argued the fiscal stability of the nation is at stake if we do not contend with the threat of unsustainable entitlements.

“This is literally a plan and roadmap to our ruin,” he said. “It will endanger the foundations of our economic success and lead to an economy weaker than we inherited.”
He referred to President Obama’s new budget proposal as a “non-serious” effort to tackle the budgetary problems because it fails to address entitlement reform.

‘Problem Is Spending’
“Our problem is not deficits and debt; our problem is spending,” said Cato’s Mitchell. He said the core challenge is reducing federal spending below future revenues—a straightforward proposition but one that will require entitlement reform, surmounting political challenges, and overcoming baseline budgeting, to become a reality.

Mitchell also noted the positive effect on health costs that would come from reconnecting patients and providers: “We do have a couple of areas in our healthcare system where markets are allowed to operate [such as laser eye surgery].… What do we find in markets where people pay out of pocket?  We find that costs are actually less than the CPI (Consumer Price Index).”

He added, “Whether you properly understand that government spending is what we need to fix, or whether you are mistakenly focusing on the symptoms—deficits and debt—it doesn’t matter because the right policy in either case is restraining the growth of spending.”

‘Make People Pay for Everything’
The Committee for a Responsible Federal Budget’s MacGuineas said she sees a 10-year window in which to reform entitlements before the budget is broken beyond repair. She emphasized the borrowing must end: “One of the best ways to control spending is to make people pay for everything you’re spending at the government level; if you allow yourself to borrow, it feels free.”

MacGuineas said Congress’s narrow emphasis so far on restraining discretionary spending means lawmakers are dealing with only 12 percent of the budget.

“The bulk of our budget does not have a budget. That is a preposterous starting point,” MacGuineas said. “We have no fiscal goal.… There is a lack of budgeting from the mandatory side of the budget. Social Security, Medicare, and Medicaid need to have budgets.”

Rep. Nunes provided a valued perspective as a member of the powerful House Ways and Means Committee, which oversees entitlement spending.

‘Exploited for Raw Political Power’
“The politics of entitlements have been going on since before Medicare was enacted.… President Johnson and proponents knew it could be exploited for raw political power,” he said.

Nunes has cosponsored the Roadmap for America’s Future, a comprehensive fiscal plan written by House Budget Committee Chairman Paul Ryan (R-WI) that recommends long-term expenditure, tax, and entitlement program reforms. In his CPAC presentation he also advocated free-market energy policies and increased government transparency to help tackle the major budgetary challenges that face the nation.

“Today, some compare our financial problems to those we faced during World War II,” Nunes said. “We climbed out of the hole then … and paid back our debt, and we can do it again.”

Doug Kellogg ([email protected]) is communications manager for the 362,000-member National Taxpayers Union, a nonprofit, nonpartisan citizen group working for lower taxes and smaller government at all levels.