Hiatt: The Progressive Case for Entitlement Reform

Entitlement reform remains essential to the creation of a fiscally sustainable future, but it has been hard for lawmakers to agree on policies to do it. Fred Hiatt’s latest op-ed in the Washington Post presents the argument that liberals should be leading entitlement reform because they appear to be the ones with the most at stake. The projected growth of mandatory spending over the coming years will put pressure on the rest of the budget, such as non-defense discretionary (NDD) spending. This category of the budget includes things like Head Start, primary education spending, and infrastructure, among many other things.

The tradeoff for lawmakers between the two categories of spending can be illustrated by the projections of each category of spending. Under current law, non-defense discretionary spending is set to decrease from 4 percent of GDP in 2012 to 2.7 percent in 2023 while Social Security and health care spending is scheduled to grow from 9.5 percent of GDP in 2012 to 11.6 percent by 2023.

Hiatt points out that part of the reason we are allowing discretionary spending to shrink is a refusal to raise additional revenue. However, that doesn't tell the whole story:

But there’s another reason for the squeeze on liberal-favored programs: the inexorable growth in entitlement spending as health-care costs grow and the population ages. Mandatory spending will reach 14 percent of GDP by 2022, compared with an average of 10.2 percent over the past 40 years. Social Security, Medicare and the other major health-care programs will account for more than half of all federal spending 10 years from now, CBO says. That takes into account the recent good news of slower-than-expected growth in health-care costs, and it assumes Medicare cuts that are unlikely to be implemented.

He states that the argument for turning away from deficit reduction in favor of other priorities has it backwards: deficit reduction is essential to freeing up resources to tackle other issues.

[The Center for American Progress] argues that the country faces many problems as or more important than the fiscal deficit, and I agree. Income and wealth inequality, slow economic growth, persistent joblessness, crumbling infrastructure, terrible inner-city schools — these all cry out for creative policy.

But they all will also be hard to address as long as government resources tilt more and more toward the older, often better-off generation.

Hiatt sends an important warning on the threat to non-defense discretionary spending if we fail to address entitlement growth. What he doesn’t mention is that this squeeze is already happening. The sequestration – which will cut non-defense discretionary spending by about 7 percent next year – is the consequence of a failure to agree to entitlement (and tax) reforms. In August 2011, this sequestration was written as a fallback to a “Super Committee” when Speaker Boehner and President Obama could not agree to these reforms previously. And the failure of the Super Committee to agree to sensible tax and entitlement changes is ultimately what led to the activation of the sequester.

Indeed, the best way out of the sequester is to replace it with more gradual and intelligent reforms that take some of the cuts away from NDD and refocus deficit reduction on other areas of the government. Hiatt is right that if we don’t address entitlements, there won’t be room for much else.