In the aftermath of the fiscal cliff deal, Democrats had a lot to celebrate. They had successfully raised taxes on the wealthiest Americans, even if they had to compromise on how many. This was an important part of President Obama’s plan to reduce the deficit, and one of the main ideological sticking points between the two parties. But they now have to face another showdown about spending reductions — one where the major entitlements will be under significant scrutiny. Most leading thinkers on the left want to take advantage of the growing schism in the Republican party between the new hard-line Tea-Party wing and the more moderate establishment to avoid any substantial cuts to Medicare or Social Security. They believe cuts to defense can suffice and allow entitlements to remain unchanged. This strategy seems relatively sound in the current political climate, and if successful would be another major partisan victory. It would also be an enormous mistake.
Medicare, Social Security and other support programs are important to ensure that people do not fall victim to poverty, starvation or sickness when they suffer setbacks. But they are also expensive, rapidly expanding and will need even more money in the future, money that can only be produced through more debt, taxes or cuts to other important programs. They provide vital services, but not enough to warrant the enormous costs they will demand as the United States’ population continues to age. More importantly, cuts to these programs are the best bargaining chip available to negotiate with GOP leadership. The focus of Democratic leadership should not be on preserving every ounce of enormous welfare programs, but rather on creating a more productive economy and skilled workforce that will reduce the need for these programs. This goal can be accomplished most effectively by boosting spending in infrastructure — especially in areas of transport and energy — and education.
Would investments in these areas be effective? Our education system is rapidly falling behind, with only 70 percent of students graduating from high school nationally. Many schools are unable to provide enough useful skills to those who do graduate, as seen by the United States ranking 17th amongst developed nations in education. The most important factor to a strong economy is skilled workers, which we are simply not producing in our underfunded and unsuccessful schools.
In 2010, a lack of investment in transportation infrastructure — under-maintained or obsolete bridges, roads, trains, etc. — resulted in the loss of about $130 billion to U.S. businesses and citizens when they were unable to move goods efficiently or get to work in a reasonable amount of time. By modernizing our increasingly ineffective methods of transportation we could prevent these types of losses to American workers in the future. It would also provide increased opportunity for business growth and improved efficiency for postal services, commuters and every other facet of business that relies on physical transport. More money needs to be spent in both of these areas to achieve a sustainable recovery.
How does spending in these areas compare to that in Social Security, Healthcare and defense? In 2010, almost identical amounts of money were spent by the Department of Defense and the Social Security Administration, about 16 percent of total federal spending each, while the Department of Health and Human Services comprised 20 percent of the budget. In contrast, the Department of Education and the Department of Transportation were 2 percent each. This ratio could certainly be more balanced.
Could defense entitlements be cut while maintaining their integrity? The military has a glut of unnecessary funding that does not represent the modern security needs of our nation. Lives will not be threatened by cuts in defense spending. In terms of entitlements, two different plans could produce significant spending reductions in a simple manner. The first would be to impose some kind of income limit to receive social security checks. People with millions of dollars of savings don’t need a check from Uncle Sam to pay the bills. The second would be simply to increase the age necessary to receive benefits by 1-3 years. This would free an enormous amount of money, and would still ensure that all seniors eventually get the benefits they have earned as longtime taxpayers.
There would be consequences, such as more seniors in the workforce pushing back retirement and preventing young people from finding a job. But if the money saved allows for effective investments to boost job growth these effects will be tempered. Increased compensation to workers would also allow for families to support older relatives without government assistance more easily.
Spending cuts will be painful for many regardless of the outcome of the fiscal debates, but the Democratic leadership has an opportunity to push for a long-term solution. If they can put aside politics and allow Social Security and Medicare along with other entitlements receive moderate cuts, they can create more opportunity for growth through increased investment in internal programs. While there would certainly be repercussions, hopefully the benefits of improved infrastructure and education will allow more families to support their older relatives without the help of the government and reduce the need for welfare programs in the first place.
Forrest Brown’s column appears Thursdays in The Cavalier Daily. He can be reached at f.brown@cavalierdaily.com.
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