Obama offers no real path forward on entitlements

Barack Obama

During his inaugural address on Monday, President Barack Obama made it clear that he was not willing to negotiate on entitlement programs. “The commitments we make to each other – through Medicare, and Medicaid, and Social Security – these things do not sap our initiative; they strengthen us,” Obama said in his defense of these government-run programs. “They do not make us a nation of takers; they free us to take the risks that make this country great.”

In his first term, President Obama talked about the need to deal with entitlements; however, he brought nothing resembling a credible plan to the table — in fact, he didn’t propose a plan at all.

Rep. Paul Ryan (R-WI), who, despite his recent shortcomings and generally bad record, has offered two credible budget plans that would both reform entitlements and pay down the national debt, responded to Obama’s comments yesterday during an interview on The Laura Ingraham Show:

Ryan said earned entitlements — where you pay your payroll taxes during your working like to get a benefit when you retire, such as Social Security — are “not taker programs.”

“When the president does kind of a switcheroo like that, what he’s trying to say is that we are maligning these programs that people have earned throughout their working lives,” he said. “So it’s kind of a convenient twist of terms to try and shadowbox a straw man in order to win an argument by default.”

And, as shown by the second inaugural address, the president will keep taking that line in his dealings with Republicans, Ryan said.

“I understand the president will continue to use straw man arguments — affix views to your political adversaries they do not have in order to try and win an argument by default,” he said.

Despite what President Obama said in his inaugural address, these programs have to be reformed in order to save them and, even more importantly, our economy in the long-term. And as Avik Roy explains, ObamaCare only exacerbates these problems for the next generation.

What President Obama doesn’t want to admit is that Medicare and Social Security, in particularly, are driving spending upwards. As I’ve explained before, the federal government currently spends around 24% of gross domestic product (GDP). Entitlements alone are around 10% of GDP. But according to the CBO’s alternative baseline scenario, entitlements will account for 16.6% of GDP by 2037. That’s just entitlements. Discretionary spending, including defense, is another 9.6% of GDP. Interest on the national debt adds in another 9.5%. By 2037, the government will spend 35.7% of GDP and the national debt will be nearly 200% larger than the economy.

It’s not a matter of whether or not Congress will reform these programs; it’s what kind of reform we’ll get, whether proposed by President Obama or his successor. Ryan’s budgets, while not perfect, offer a good starting point for reform, and they do in a way that promotes economic growth. As we’ve seen in his first term, solutions to economic issues under President Obama generally result in destroying growth — whether it’s through tax hikes or spending financed off of debt.

Tax hikes to fix entitlements, which almost certainly be pushed by this administration if and when they decide to tackle them, isn’t a realistic answer. That’s a risky gamble — one that sacrifices economic growth — and it doesn’t really solve the larger issues with these bankrupt programs.

 


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