A Path to Meaningful Entitlement Reform

The national debt is rapidly approaching $20 trillion. The current federal budget deficit is nearly $600 billion. If the debt were apportioned equally, every man, woman, and child who is a citizen of the United States would owe $61,345, as of this writing. Those are simply the facts.

Here are other facts. The primary driver of the exploding national debt is so-called “mandatory spending”—in other words, entitlements. Medicare and Medicaid combined cost more than $1.1 trillion, while Social Security is over $925 billion annually. Defense spending, by contrast, totaled just under $600 billion in fiscal year 2015.

Yes, according to popular belief Social Security is supposedly a system where the government acts as a guardian of retirement funds, withdrawing those funds from a working person’s paycheck and returning the money years later to new retirees. But in reality, those funds were spent long ago. The government is funding Social Security benefits for current retirees with the tax revenue from current workers—and there are no longer enough new workers for the government to keep up the charade. The system truly is a Ponzi scheme of epic proportions, and sooner, rather than later, the system will come crashing down, absent significant reforms. If we continue following the present course, today’s workers cannot expect to see any Social Security benefits of their own, decades in the future. They (including myself) will have been, quite simply, stiffed.

Most Democrats—and many Republicans—don’t want to talk about the real reasons behind the massive national debt. Even many of the so-called “deficit hawks” prefer to nibble around the edges of the problem, going after government waste but unwilling to speak out strongly against the rapid growth of the entitlement state. If they truly want to get the debt and deficit under control, the answers lie within the reformation of the “Big Three”: Medicaid, Medicare, and Social Security.

To be perfectly honest, Social Security was a mistake. If I were a member of Congress in the 1930’s, I would have voted against it. But the fact of the matter is that in the decades since its enactment, millions of seniors have come to depend on it, and the program is now an integral part of the fabric of the nation. Like it or not, Social Security as a basic institution is here to stay.

But that doesn’t mean that significant reforms can’t be attempted, to make the program better and more financially sound. For starters, the Social Security retirement age, for full benefits, is either 66 or 67, depending on date of birth. When the program was first enacted, the retirement age was 65, and the average life expectancy was 62. Today, the average life expectancy is 79. A program originally intended to support senior citizens in the final few years of their lives now routinely serves to fund an increasingly active lifestyle for decades. For the program to remain solvent, the retirement age for full benefits must be raised to at least seventy (excluding, of course, those at or near the current retirement age).

Reducing—or eliminating entirely—Social Security benefits for high-income earners should also be seriously considered. Making millions of dollars over the course of your career is cause for celebration, but there is no reason for you to receive an additional check from the government every month.

And (again exempting current and soon-to-be retirees), the reduction of Social Security benefits for everyone should be an issue closely studied.

Medicaid and Medicare are also in need of substantial reform, particularly with regard to the current payment method of Medicaid benefits. A system of block grants to the states, which would allow for greater flexibility and innovation in existing state programs, would save money and reduce waste even if no cuts to benefits were considered.

It’s time for lawmakers in both parties to let go of their fear of the “Third Rail”, and challenge established wisdom regarding the entrenched entitlement state. The fiscal future—and national security—of the country depends on it.