Conservatives against spending cuts?
By W. James Antle III
“Bush’s Social Security plan cuts benefits.” This Associated Press headline was exactly the response Republicans most feared when President Bush announced in a press conference that slower benefits growth for more affluent seniors would be part of his Social Security reform plan. With news reports like this, they worried, the Democratic National Committee press releases would write themselves.
The Heritage Foundation described the presidential trial balloon as a change designed to “ensure that all seniors receive benefits at or above today's level, while benefits for lower-income seniors should grow more quickly than those for higher-income seniors.” Progressive indexing is the latest form of means-testing, an approach to bringing federal retirement spending under control that has long been touted by entitlement reformers from across the political spectrum.
It’s understandable that Democrats would sputter with outrage while GOP politicians trembled. What is more surprising is the response from some free-market activists engaged in the realm of ideas as opposed to winning elections. Human Events, the venerable conservative newsweekly, detailed the hostile reaction.
Lawrence Hunter of the Institute for Policy Innovation and the Free Enterprise Fund characterized progressive indexing as “politically explosive” and likely to “undermine” free-market reforms based on personal investment accounts. His boss at the Free Enterprise Fund, Stephen Moore (long known for his opposition to big spending as well as high taxes), complained to the Washington Post about a “nightmare” that could “cost Republicans the Senate in 2006.”
When did conservatives become intrinsically hostile to federal benefits cuts? “Cutting future promised benefits is unnecessary,” Hunter told Human Events. But these are promises that we can’t afford to keep.
Moreover, what moral claim does a wealthy retiree living in comfort have on the income of a 20-year-old woman waiting tables to pay her tuition bills? Conservatives have rightly mocked the concept of “welfare rights” when applied to the poor. Neither do such rights exist for the rich or the middle class.
This aversion to old-fashioned budget trimming on the right is not new. In the 1980s, some conservatives argued that it was time for the Republican Party to shed its image as the party of austerity and instead, through its embrace of supply-side tax cuts, become the party of growth. What was needed was not the “root canal politics” of government benefit-slashing, but policies that enhance incentives, unshackle markets and accelerate growth.
And the economy did grow in response to the ‘80s tax cuts. For a while, it was even possible to claw back the federal income tax take while leaving most of Washington’s Great Society apparatus intact. But the books could not be balanced by growth alone and the Reagan-era tax cuts were steadily eroded in response to concerns about the deficit. Already, the Bush tax cuts – which left the top marginal income tax rate higher than when Bill Clinton took office – are in similar danger.
This time, conservatives who wish to avoid a head-on confrontation with the goodie-dispensing powers of the redistributive state tout not tax cuts but personal accounts. Like the supply-siders (more than a few of whom can be found in this camp today), they are not completely wrong. Meaningful entitlement reform requires a shift away from the social-welfare policies of old toward individually controlled pension and medical plans based on private wealth accumulation.
But the promise of long-term savings doesn’t make the short-term costs less real. If younger workers invest a portion of their Social Security payroll taxes in personal accounts, it will divert revenue from today’s pay-as-you go system. The transition cost will have to be covered somehow. It strikes many Americans as irresponsible for these costs to be financed entirely by borrowing; given the federal government’s current borrowing and the creation of new unfunded liabilities for Medicare through the prescription-drug entitlement, they may even be right.
There’s no denying that efforts to control spending can prove politically costly. Conservatives against benefit cuts often point to the GOP’s 1986 Social Security cost-of-living adjustment adventure and 1995 Medicare reform fiasco as examples. But these were both ham-fisted attempts that ended in failure. When reforms are actually enacted and no amount of demagoguery can conceal the fact that the world did not come to an end, the costs are much lower.
None of this means that the White House will necessarily craft a sound Social Security plan. It would be easier to take the president seriously on this issue if he had not signed the Medicare prescription-drug benefit. But the solution will require some mix of spending restraint and personal wealth accumulation. Controlling the cost of Social Security benefits need not undermine free-market reform. Done correctly, the two policies are complementary.
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