Heartland Institute Releases New Policy Brief on Entitlement Reform

Published December 14, 2012

Peter Ferrara, senior fellow for entitlement and budget policy at The Heartland Institute, is preparing a series of eight Policy Briefs that will be compiled into a book in 2013. The first of those documents, A Winning Plan for Entitlement Reform, was released today.

Read the Policy Brief here. To interview Peter Ferrara, please contact Tammy Nash at [email protected] and 312/377-4000. After regular business hours, contact Jim Lakely at [email protected] and 312/731-9364.

In this first installment of the series, Ferrara outlines the scope of the entitlement-driven debt crisis. Current projections by the Congressional Budget Office show federal spending would rise to 30 percent of GDP by 2027, 40 percent by 2040, 50 percent by 2060, and soar to 80 percent by 2080.

“Add in state and local government spending, and we are literally on a course toward full-blown communism, where the government takes and spends everything the economy produces,” writes Ferrara, adding the passage of Obamacare was “reckless and irresponsible” because it added “napalm” to the debt fire.

Ferrara proposes a series of market-based reforms to welfare, Social Security, Medicare, and Medicaid in a way that will ease “human suffering if we can prevent it.”

“What is involved here is an extension of supply-side analysis to the incentives of essential social safety nets in evaluating how to structure those in order to maximize program effectiveness, economic growth, and national prosperity,” Ferrara writes in A Winning Plan for Entitlement Reform.

A Broken System

Ferrara writes, “the current entitlement programs based on tax and redistribution all detract from economic growth by creating counterproductive incentives that produce counterproductive behaviors” – such as failing to work if able to do so. Not working “is counterproductive for the poor themselves,” Ferrara writes, “because they lose the market incomes and future prospects that come from working and consequently are consigned to continual poverty and dependency.”

In addition, writes Ferrara:

  • “Social Security and Medicare discourage workers from saving for retirement by providing a free income and free health care without saving.”
  • “The health care system – rife with government intrusion at all levels – induces soaring health care costs through the counterproductive incentives of third-party payment.”

Modernizing the Saftey Net

Ferrara’s Policy Brief says America can achieve a “breakthrough” if it builds a new, modern safety net “based on modern capital and labor markets with pro-growth market incentives.” Such a reform would promote “positive rather than self-destructive behaviors [and] would not be a costly burden on the nation’s taxpayers.”

Ferrara’s reform ideas focus on “involuntary poverty” and establish a system in which “private employers would be paying the poor to work and contribute to the economy, instead of taxpayers paying the poor not to work.”

A modernized safety net, Ferrara writes, is based on the concept of individual choice. Seniors could choose to stay in the current, old-fashioned version of Medicare, or enter into market-based options based on the concept of “Patient Power,” advanced by John Goodman, president of the National Center for Policy Analysis.

Building a Better System

Below is an outline of the next seven Policy Briefs by Peter Ferrara on entitlement reform, to be released in 2013:

  • How to get the economy booming again, a key to solving the entitlement crisis.
  • Expansion of the 1996 block-grant reforms to nearly all 200 federal, means-tested welfare programs.
  • A proposal to turn the “travesty of the current Medicaid program” into block grants to the states, which spend taxpayer money more effectively and efficiently.
  • How and why to repeal and replace Obamacare with Patient Power, a reform that expands health savings accounts throughout the entire medical delivery system, including Medicaid and Medicare.
  • Social Security reform that empowers workers with the freedom to choose personal savings, investment, and insurance accounts that will provide “a new foundation of prosperity for every family and every worker in the nation.”
  • Medicare reform based on the premium-support model offered by Rep. Paul Ryan.
  • The option to choose private life and disability insurance to replace Social Security survivors and disability benefits.

“Today the Left is insisting on no change to old-fashioned, outdated, financially unsustainable, counterproductive entitlements, whereas innovators on the New Right are offering fully modernized safety nets that rely on modern capital and labor markets and positive, pro-growth, market incentives, to better serve the poor, seniors, the sick, and the disabled, at just a fraction of the costs of the current programs,” Ferrara writes. “These reforms are key to enabling the United States to avoid the financial catastrophe of Greece and other European social-welfare states. This is what makes entitlement reform politically winnable.”

Read the Policy Brief here.

The Heartland Institute is a 28-year-old national nonprofit organization headquartered in Chicago, Illinois. Its mission is to discover, develop, and promote free-market solutions to social and economic problems. For more information, visit our Web site or call 312/377-4000.