IN A post-midterm elections interview, President Obama told 60 Minutes that “we’re gonna have to…tackle some big issues like entitlements that, you know, when you listen to the Tea Party or you listen to Republican candidates they promise we’re not gonna touch.” His budget proposal, which landed on the Hill this week, does not include recommendations to cut Social Security and Medicare. However, the White House defined the budget as merely Obama’s “opening bid” and hinted broadly that the social safety nets may well have to be lowered.
In order to win back independent voters, centrist Democrats are urging the president to show that he can think big and act big by taking on unpopular issues like Medicare and Social Security. Alice Rivlin, a former budget director under President Clinton, argues, “This is a convenient moment to do this. The only better time to fix Social Security than this year is last year or the year before.” She calls on Democrats to get out in front of the problem “by trimming outmoded federal programs and increasing revenue over the long term by raising the retirement age for Social Security and means-testing Medicare benefits.”
Both legislators and media mavens argue that cutting into the social safety net is not merely necessary to reduce the deficit, but that it is mathematically inevitable. They remind us that 60 percent of the federal budget is eaten up by entitlements. We are told that there is simply no other place from which to take a huge sum to reduce the deficit. As Senator Michael Bennet (D-CO) put it, “we can’t solve our budget crisis without dealing with our entitlements.”
All these statements fail to hold up—mathematically, morally, and politically
The secret for solving the math problem is to stop assuming that the pie’s size is fixed. The “inevitable” need to cut into social safety nets is inevitable only if one refuses to collect additional revenues. A carbon emissions tax of $10 per ton of carbon content could generate $50 billion a year. A cap-and-trade system would generate as much as $1.9 trillion in revenue between 2012 and 2019. A broad-based value-added tax, like the European Union has, at a low rate of 5 percent would generate as much as $260 billion in 2012. Restoring the tax on estates worth over $1 million would yield about $1 trillion in revenue between 2012 and 2021. Over the next ten years, we would collect $700 billion if the wealthiest among us had their income over $250,000 taxed at a slightly higher rate.
Tax reform is also on the table. The government loses about $1 trillion every year from tax loopholes. Over half of these losses come not from measures that apply to large segments of the population, like mortgage-interest deductions, but from giveaways to special interests. Removing these giveaways from the tax code could return to the Treasury more than $500 billion a year.
Whether or not one agrees to any of these revenue-generating moves, they demonstrate that cutting entitlements is a matter of choice, not a mathematical necessity.
The case for social safety nets is often made on social justice grounds. These programs lift millions of Americans out of poverty, more than all other federal programs combined, and they and provide a modest amount of transfer payments—from more affluent Americans to those less endowed. They are also defended on social contract grounds. Senior citizens and those late in their careers have planned their whole lives around the assumption that the safety nets they paid into would be there when they retired or became infirm. To violate this contract is manifestly unfair.
There is another moral argument to consider. If we must make cuts, we ought first to cut those budget items that in effect pay for harmful activities and then those without any discernable social benefits, before we even consider touching those that are beneficial—even if the benefits are limited and their costs are high. This is a sociological version of the Hippocratic Oath: first, do no harm.
In 2010, total Medicare spending was estimated to be about $500 billion. This program is likely to go bust before Social Security—perhaps as early as 2029. The National Commission on Fiscal Responsibility and Reform recently issued a draft report which calls for putting a cap on what the nation can spend on Medicare, while others call for delaying the age at which one qualifies for care. States are already moving to cut services in ways that are harmful to Medicaid. In Arizona, Governor Jan Brewer is asking the Obama administration for permission to remove 280,000 people from Medicaid rolls. In California, Governor Jerry Brown is limiting doctor visits and prescriptions for Medicare beneficiaries. In Georgia, Governor Nathan Deal has proposed to end Medicaid coverage for adult dental, vision, and podiatry treatments, and South Carolina is proposing to end hospice care.
These and other suggested cuts are highly immoral, as long as there are potential ways to fund these programs by curbing services that are harmful or have no proven benefit.
For example, if we standardized the forms used by insurance companies instead of relying on the myriad forms that are currently used, we could save $7 billion in overall health costs every year.* It is immoral to take treatment away from anyone before cutting down on paperwork.
Most developed countries—including, until recently, the United States—do not allow pharmaceutical companies to advertise prescription drugs on TV, because these ads pack an emotional, not an educational, appeal. They lead people to pressure their physicians to prescribe medications that are frequently useless, risky, or both. And they lead people to purchase drugs for illnesses they don’t have. For example, nearly one million children take Ritalin for ADHD, an illness an untold number of them do not have. One study of direct-to-consumer advertising shows that it leads to an additional $2.6 billion in spending on prescription drugs each year. If we restored the ban on prescription ads on TV, consumers would save $2.6 billion. We are morally bound to reinstate the ban on such ads before we deny anyone a life-saving transplant, as was recently done in Arizona.
Turning to big bucks: the United States spends twice as much on administrative costs for health care as many other countries. One reliable source holds that our administrative costs amount to $30 out of every $100 spent on health care, compared to $17 in Canada. There are many reasons we cannot match Canada’s parsimonious ways, but if we cut only part of the difference in administrative overhead, we would save tens of billions each year. It is immoral not to cut administrative costs before cutting off someone’s kidney dialysis, as was done in Atlanta.
Some experts snicker when people argue that we can get the money we need by eliminating fraud and abuse. Yet we are duty-bound to increase the efforts to plug the leaky bucket before we deny seniors the right to dip into it when they are ill. A recent segment on 60 Minutes demonstrated that the Medicare fraud industry in South Florida is now larger than the cocaine industry, due the relative ease of swindling Medicare: there’s less risk of exposure and less risk of punishment if caught. Crooks buy patient lists and bill the government for expensive items ranging from scooters to prostheses to the tune of some $60 billion a year. Because Medicare is required by law to pay all bills within thirty days and has a small accounting staff, it often cannot vet claims before the checks go out. By the time Medicare authorities find out a storefront’s bills are phony, the crooks have closed their operation and opened one next door under a different name. We should not cut anyone’s benefits until the government triples its accounting staff and quadruples the number of such crooks in jail.
As much as $325 billion is burned up every year in unnecessary treatments in the health care system. Cutting back on these procedures would reduce the deficit without denying benefits to anyone. The nation would do even better if it could reduce the 98,000 deaths caused every year by medical error. We would save billions and reduce harm. This doesn’t require heroic measures, but steps such as getting doctors to wash their hands and using computers to prescribe medications rather than relying on illegible handwriting.
This is not to say that we should rule out adjusting our benefits. For instance, it’s not unreasonable to consider slowly delaying the onset of Social Security benefits as people work and live longer. However, it is morally wrong to deny a single penny of benefits to those who retired or plan to retire or are ill and infirm before we greatly increase the number and prerogatives of those who go after the billions siphoned off by crooks, wasted by bureaucrats, and squandered on useless medical interventions that can make people sicker—or even kill them.
Too often, what is right is not politically easy (like major reallocations of wealth) and what is politically easy can be morally troubling (like not taking on gun “rights”). However, the good news is that protecting the social safety nets is both right and politically sound. Many moons ago, Harris asked a national sample of adults, if a presidential candidate agreed with you about everything but one issue, would you switch sides? With almost every issue the pollster listed, only 3 percent or less said they would switch. The only exception was Social Security, which got 25 percent to switch sides! The Democrats’ greatest strength, at least on the domestic front, is that they are known champions of Social Security and Medicare. When asked who they trust to do a “better job handling Social Security,” the public sides with Democrats by a fourteen-point margin.
If Democrats make deficit-cutting, pro-business policies and continued investment in Afghanistan major elements of their agenda, as President Obama seems inclined to do, they may win over some independent voters. And if the GOP keeps moving to the right, this Democratic strategy may suffice to win the next presidential election and improve the Democrats’ standing in the House. However, as President Truman said so long ago, when Democrats nominate a “Republican” to run against a Republican, the American people will elect the Republican every time.
If the Democrats become a “Me Too” party, following a watered-down Republican agenda, they will lead us to the results President Truman predicted long ago. Instead, Democrats must protect the social safety net. It is what is right, and it is not politically naïve.
Amitai Etzioni is a University Professor at the George Washington University and author of The Active Society and New Common Grounds, among other books.
*Note that this calculation and those that follow take into account reductions in general health care expenditures—hence, reductions in the expense of federal health care programs.