There are fewer and fewer economic principles on which Democrats and Republicans can agree, and any point of consilience will surely be forgotten as some momentary partisan need overwhelms reason and sense. Surely, however, we can all agree on a few points:
One, the U.S. government owes more than $20 trillion to foreign and domestic investors. Two, the national debt is well beyond 100 percent of the total annual output of the American economy—a defensible state of affairs during a cataclysm on the order of the Second World War but sheer idiocy in peacetime. Three, the federal government’s yearly expenditures outstrip revenues by half a trillion dollars or more—our current budget deficit is $693 billion and climbing. Four, by far the largest contributors to our debt and deficits are the big three “entitlement” programs, Medicaid, Medicare, and Social Security. And five, there is currently no plan to do anything about any of it.
Part of the reason Washington policymakers have shown so little urgency on the subject is that it’s proven so easy to avoid. Entitlements are complicated, and the details are mind-numbing. There are a lot of upward-pointing arrows, percentages, and incomprehensibly large numbers. The dangers are vast, but not immediate. They are hard to get excited about, as long as the checks are in the mail. It’s also a hard problem to pin on one’s ideological foes—although it’s very easy, as congressional Democrats have shown many times over the years, to characterize anyone who proposes reforms to social welfare programs as an unfeeling monster. Reporters are rarely concerned about it unless (as is the case today) Republicans are pushing for tax reforms that could have an adverse impact on annual deficits.
Washington abounds in what high-minded editorialists call “serious problems,” but the unchecked growth of entitlement spending really is one: It threatens slowly to unmake the American economy and throw the republic into chaos.
At present, entitlement spending stands at about a tenth of our GDP, meaning that one out of every ten dollars an American earns goes to pay for Medicaid, Medicare, or Social Security. If present trends continue, that portion will grow to over 15 percent by 2047. The payments can’t simply be reduced in budget negotiations: The federal government is legally obliged to pay set rates and amounts to current and future beneficiaries, and it can’t do otherwise without changing the law. And as the government struggles to pay for these programs, the number of beneficiaries—the number of people “entitled” to benefits—grows larger and larger. Advances in medical care mean people live longer and draw more from Social Security and Medicare, and well-meaning programs like the Affordable Care Act vastly increase the number of people eligible for Medicaid. As the economy struggles to keep up, growth falters and wages stagnate. In short, we become poorer.
Entitlement growth threatens government, too. As more and more public dollars must be directed to mandatory welfare programs, the discretionary part of the federal budget will grow smaller and smaller. All those programs that liberals love—research and development for green energy, foreign aid, cultural subsidies, and on and on—will have to go. So will all those federal appropriations to the states, many of which depend on federal largesse for a third or more of their entire budgets.
Brave souls have proposed reforms. George W. Bush began his second term, for example, with a courageous but poorly executed effort to get Congress to allow taxpayers to divert some Social Security savings to private accounts. Paul Ryan considered leaving Congress after Democrats won the House of Representatives in 2006 but chose instead to return with a determination to reform entitlements. Ryan overcame the timidity and ignorance of his own party leaders and, after Republicans won back the House in 2010, used his position as House Budget Committee chairman to include major entitlement reforms in the official governing proposal of the House. Republicans voted to retool Medicaid by providing states limited block grants to fund their programs. Ryan’s budget would have overhauled Medicare spending, the largest driver of our debt, by replacing the bloated, inefficient direct-payment system with premium support to insurers for plans chosen by beneficiaries. “The vote represents the most ambitious effort yet by the new Republican majority in the House to demonstrate that it intends to aggressively rein in spending and shrink government,” reported the New York Times.
Ryan’s plan had 14 cosponsors when it was introduced, and national Republicans issued stern warnings to their candidates about the perils of embracing Ryan-style entitlement reform. But once it passed, Republicans voted to support it year after year. The contrast with Democrats was clear: With the debt increasing at an exponential rate, Republicans sought to reform the programs driving it ever higher, even as Democrats, largely ignoring the growing crisis, created another entitlement.
That contrast is gone now. Congressional Republicans complain about the explosion of debt under Barack Obama and have included some past reforms in their current budget proposals. But the modest changes to Medicaid that were part of GOP attempts to reform Obamacare proved too bold for some Senate Republicans and played a key role in killing the effort. So the debate about entitlements is back to where it was a decade ago, when the debt was a mere $8.6 trillion.
The crisis is more acute today for reasons beyond just math. The prospects for real entitlement reform are even dimmer now than they were back then. And for one basic reason: Donald Trump.
The president opposes entitlement reform. “I’m not going to cut Social Security like every other Republican, and I’m not going to cut Medicare or Medicaid,” Trump told the Daily Signal a month before announcing his candidacy. “Every other Republican is going to cut, and even if they wouldn’t, they don’t know what to do because they don’t know where the money is. I do.”
That’s . . . unclear. In that interview, Trump attributed the debt to “killers from China” who have taken American manufacturing jobs. He does not appear to have learned anything in office. Trump recently attributed the debt to multilateral trade deals and foreign aid. In early October, when Forbes editor Randall Lane asked him about the unseen benefits of foreign aid, citing the Marshall Plan, Trump responded: “For me, it’s America first. We’ve been doing that so long that we owe $20 trillion, okay? It’s America first. We have to build up our country. I got elected. It’s called Make America Great Again. We have debt. We have deals going.”
A few days later, Trump suggested that growth in the stock market effectively reduces the debt. “We took [the country] over and owed over $20 trillion,” he told Sean Hannity. “As you know, the last eight years, they borrowed more than it did in the whole history of our country. So they borrowed more than $10 trillion, right? And yet, we picked up $5.2 trillion just in the stock market. Possibly picked up the whole thing in terms of the first nine months, in terms of value. . . . And maybe in a sense we’re reducing the debt.”
We are nonplused. It’s hard to know what to say about such nonsensical remarks. To make the most obvious point: If gains in the stock market reduced the national debt, the Obama years (235 percent growth in the S&P 500) would not have resulted in a near-doubling of U.S. debt.
The inescapable conclusion: On the most urgent domestic policy issue facing the country, President Trump has no idea what he’s talking about.
There are reasons to doubt he wants to learn. In their first face-to-face meeting after Trump became the de facto Republican nominee, Paul Ryan tried to give him an adumbrated version of the entitlement-reform PowerPoint he’d given to his constituents and colleagues over the years. Trump cut Ryan off shortly after he began. The future president explained that he’d leave policy to Ryan and his colleagues while he made American great again by giving speeches and holding rallies. Trump simply wasn’t interested. And even in ignorance, Trump is famously stubborn.
But the issue is too important for responsible people to just give up. Trump has shown a willingness to change his mind when advisers he respects have urged him to do so. (His recent announcement on Afghanistan is one example.)
The task falls largely to one man: Mick Mulvaney, director of the Office of Management and Budget. Mulvaney and Trump have become close over the first nine months of the administration. Trump calls Mulvaney at all hours of the day for advice on fiscal policy and much else. Mulvaney, a deficit hawk who was a member of the House Freedom Caucus from South Carolina, was a proponent of entitlement reform in Congress. He understands the problem and appreciates the need to make it a priority. The question, for Mulvaney and those who would help him, is a simple one: Do I tell the president not what he wants to hear but what he needs to hear?
If they don’t—if they opt for the easy answer rather than the right one—we will look back at the end of the Trump presidency with a nostalgic fondness for the days when the debt was only $20 trillion, when America was still an economic superpower, and when the U.S. government hadn’t yet buckled under the weight of its unpaid bills.
