Almost every Saturday I do a 30-minute segment on my pal Larry Kudlow’s national radio show. Often the other two guests are John McIntyre of RealClearPolitics and Steve Moore of the Heritage Foundation. During last weekend’s show, Kudlow asked whether Republicans were taking a risk talking about entitlement reform. McIntyre thought it was “politically dangerous,” and they would do better to focus on economic growth. And Moore had this to say:
I think the Republican message that we’re going to cut entitlements is a loser. I just think it’s a loser. If the Democratic message is, “We’re going to make your benefits,” and the Republican message is, “We’re going to make them worse,” I’m sorry, I don’t think that’s a winning message. … If we get this economy growing at three and a half, four percent a lot of these problems, especially with Social Security go away. … I think this message that we’re the root canal party, I’m worried about that. …
Thoughts:
1.) I don’t get this: So we’re going to grow our way out of the debt and entitlement problem … via faster economic growth … enabled by tax cuts that would lose trillions of dollars? Why would voters believe that message, especially after (a) Republicans have spent the Obama presidency issuing apocalyptic warnings about the exploding national debt, and (b) the last time Republicans passed a big tax cut plan the economy ended up not booming? Whatever the correlation/causality, voters might remember that last one, nudged along by Democrats.
2.) Look, the average 10-year revenue loss from the GOP tax plans reviewed by the Tax Foundation is $6 trillion, under a static scoring analysis, and $3.5 trillion, assuming economic growth feedbacks. Again, would voters outside a GOP primary find these plans at all credible — especially when accompanied by a non-plan or hand wave to reform entitlements? I mean, would the smart messaging plan be to advocate entirely eliminating nondefense discretionary spending? Which is this stuff:
Examples of other well-known programs paid for by discretionary spending include the early childhood education program Head Start (included in Housing & Community), Title I grants to disadvantaged schools and Pell grants for low-income college students (Education), food assistance for Women, Infants and Children (WIC), training and placement for unemployed people provided by Workforce Investment Boards (in Social Security, Unemployment and Labor), and scientific research through the National Institutes of Health (NIH) and National Science Foundation (NSF), among many others.
3.) And some fiscal truth, via my colleagues Alan Viard and Mike Strain:
… entitlement reductions will be part of the fiscal solution, and the most growth-friendly approach to fiscal consolidation would go heavy on spending cuts and light on tax increases. But public and political attitudes make it clear that it will be possible to secure significant entitlement reductions only if they are accompanied by tax increases. Democrats’ opposition to entitlement cuts and Republicans’ ambivalence about them make a budget strategy that relies entirely on entitlement cuts politically unviable.
Therefore, revenue will have to rise to restore fiscal balance. Indeed, the only significant entitlement benefit reduction in recent years, the benefit cuts in the 1983 Social Security legislation, were part of a bipartisan agreement that also included tax increases, as further discussed below.22 Democrats strongly support increasing revenue as a share of GDP. And Republicans are starting to accept this as well. Ryan’s budget proposal calls for revenue to rise to 19.1 percent of GDP by fiscal 2023, significantly above the 1960-2013 average of 17.9 percent.
4.) This is proving prescient:
A few quick facts on entitlement spending: (a) CBO projects federal spending on Medicare and Social Security over the next 25 years will rise by roughly 3 percentage points of GDP, to 11% from 8%; (b) an aging US population will be the prime driver of that projected higher spending; (c) a middle-class, one-earner couple retiring in 2030 will receive $1.3 million in lifetime Medicare and Social Security benefits having paid in just under $500,000.
To me, these numbers argue pretty strong in favor of reforming entitlements to spend less than projected and weighting that future spending more toward lower-income Americans. Now I have been worried that Republicans are backing way from reforming Medicare and Social Security in favor of cutting Medicaid and various income support programs. The former would be classified as “earned benefits” or as the WSJ’s Homan Jenkins as put it, “… middle-class rewards for a life of hard work and tax-paying, against Mr. Obama’s vast expansion of the means-tested welfare state for working-age Americans.”
5.) We need faster economic growth, but setting such a high target and making it so dependent on tax policy leads to some really unbalanced proposals. We need a tax code that is economically efficient and scalable. And we need entitlement reform, maybe like this.
from AEI » Latest Content http://ift.tt/1MCAbRJ
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