The great question haunting Washington’s budget debate is whether our elected politicians will take back government from AARP, the 40 million–member organization that represents retirees and near retirees. For all the partisan bluster surrounding last week’s release of President Obama’s proposed 2012 budget, it reflects a longstanding bipartisan consensus to not threaten seniors. Programs for the elderly, mainly Social Security and Medicare, are left untouched. With an aging population, putting so much spending off-limits inevitably means raising taxes, shrinking defense, and squeezing other domestic spending—everything from the FBI to college aid.
Power is the ability to get what you want. It suggests that you control events. By these standards, AARP runs government budgetary policy, not presidents or congressional leaders. Obama says we must “win the future,” but his budget (and, so far, the Republicans’ too) would win the past and lose the future. The massive federal debt would keep growing because, without restraining spending on retirees, there’s no path to a balanced budget. Our aging infrastructure (highways, bridges, airports) wouldn’t get needed repairs. The social safety net for the growing ranks of poor Americans would be further strained. We would cut defense while China’s military expands. All this is insane. It’s not the agenda of a country interested in its future.
But it’s our agenda. Look at Obama’s budget. Under his proposals, annual federal spending rises from $3.7 trillion in 2012 to $5.7 trillion in 2021. Social Security, Medicare, and Medicaid (the three major entitlements) account for 60 percent of the projected $2 trillion increase. Higher interest payments on the debt—mainly reflecting our inability to control big entitlements—account for an additional 31 percent. Altogether, that’s 91 percent of the increase; the rest of government accounts for 9 percent.
Indeed, when corrected for expected inflation and population growth, the rest of government shrinks. A table (S-6) in Obama’s budget shows this clearly. From 2012 to 2021, annual spending on defense and homeland security would drop 21 percent after inflation and population adjustments. Nonsecurity discretionary spending (a catchall including air-traffic control, space exploration, regulation, and much more) would fall 24 percent. Other “entitlements” (food stamps and the like) would decline 4 percent. Meanwhile, Social Security would rise 27 percent and Medicare, 32 percent.
AARP sends its representatives to Capitol Hill and think-tank seminars, where they pretend to be reasonable while frustrating needed Social Security and Medicare changes. Higher life expectancy and growing private savings mean that eligibility ages could have been gradually raised and benefits curbed for wealthier retirees. The age for full Social Security benefits did go from 65 to 66 (and to 67, much later). Little else was done. As a result, any effort to control spending must focus on a relatively small part of the total (from a seventh to slightly more than a third, with defense). House Republicans have cut many programs sharply—some sensibly, others not. Obama is doing the same, though less dramatically. But AARP sets overall priorities.
It won’t work. The budgetary math doesn’t compute; too much is left out. Consider Obama’s projected budget for 2021. Despite higher taxes—about 10 percent above the 1971–2010 average—and deep cuts in defense and domestic discretionary spending, the deficit is estimated at $774 billion, or about 3 percent of the economy, albeit down from 2010’s 8.9 percent. And that assumes “full employment,” a 5.3 percent jobless rate.
No one wants to strip needy seniors of essential benefits; but Social Security and Medicare have become, for many relatively healthy and economically secure Americans, middle-class welfare. As a society, we need to re-define what’s in the public interest and what’s not. That’s the job of our political leaders. President Obama repeatedly pledges to deal with “entitlements”—and does nothing. He made the promise again last week. At the same time, congressional Republicans committed to proposing entitlement changes. We’ll see if that happens—or if power continues to be forfeited to AARP.