Trump’s inauguration last weekend, January 20, 2017, proceeding millions of women marching across the nation the following day is the true dawning of a time of significant policy change. Politics has always been contentious, but we are seeing a massive push and pull between demographics, political groups and individuals than ever before. During Trump’s first week in office, he has signed five executive orders: expediting the Keystone XL and Dakota Access Pipeline, withdrawal from Trans-Pacific Partnership, pushing American made steel, and expediting infrastructure. And this was just his first day.
We look at states such as Illinois, that are sliding into more debt than they can handle, and seeing taxation creep up, higher and higher in an attempt to compensate. The US is currently in a $19 trillion debt. And one of the most unsustainable federal programs is entitlements-- especially health care. Between mounting healthcare costs, falling birth rates, large retiring generation costs and millions of poor, we are not in the best position.
According to the recent Congressional Budget Office report, “growth in revenues over the next ten years is outpaced by increases in spending-- particularly for Social Security, Medicare, and interest payments on federal debt. The deficit remains at roughly 2.8% of GDP through 2018 but climbs to 4.9% of GDP by 2026.” Deficit reduction may not seem dire to some citizens, but if we continue down this rabbit hole, it would risk investors becoming unwilling to finance government borrowing unless they were compensated with higher interest rates, lawmakers would have less flexibility to use tax spending policies to respond to unexpected challenged and more.
When we hear entitlement reform, the republican think of slashing spending, and the democrats want to find money to continue funneling into current standing programs. However, there must be a way to strike some level of compromise, increase revenue, and still provide for America’s most vulnerable.
Speaker of the house, Paul Ryan, has proposed a reform to entitlement, and seeing the landscape of the legislature and presidency, there is a good chance of some kind of reform taking place. He has advocated his whole career to balance the budget, reform tax code, and change entitlements. Now it is not just Ryan, most republicans will not be in favor of reform that doesn’t balance the budget in 10 years. The Congressional Budget Office report, has confirmed that entitlements must be tinkered with in order to balance the budget.
Another challenging aspect of entitlement reform is dealing with the aging population. There is a lot of finger-pointing between current living generations and who did what, and what they could be doing better. Fact of the matter being, we have a huge generation beginning retirement now, and will continue to do so for the next 20 years. The baby boomer generation is currently between the ages of, 71-53. And like everything else, social security and medicare preservation has a politicized spin. Though the millennial generation is a large demographic as well, their voter turnout has much to be desired. Overall, if one of the largest voting blocks is moving into retirement, would any politician advocate for social security or medicare spending reduction? Trump was quoted saying broad based entitlement reform is, “political suicide”, this dates back to Ryan’s Medicare proposals in 2008 as well. Trump is hoping to maintain entitlements, and improve economic performance, and to overall increase revenue to these programs.
From another angle, a nonpartisan research institution, No Labels, produced a policy playbook and one point they cover is, reasonable entitlement reform that was approved by 63% of Americans they polled. They confirm the assessment of the current situation, “Social Security and Medicare are not sustainable on their current trajectories due to the retirement of the enormous Baby Boom generation, falling birth rates and rising health care spending.” The report continues to propose to increase revenue into social security by increasing the annual limit on earning from payroll tax from, $118,500 to $240,000. This would cover 90% of the payroll base, bringing us back to the level in 1983 during Reagan's presidency. This would cover an additional 1% of salaries. No Label’s also proposes to significantly tighten eligibility requirements and fight fraud with better regulation. “A recent study by the Social Security Administration revealed that disability program beneficiaries were overpaid by $17 billion over the last 10 years.” Improved oversight can help on both ends. Gives beneficiaries a clear idea of what they are to receive, and clear up unnecessary spending. If a client is overpaid by the VA for example and it is noticed, the VA has the right to revoke or reduce benefits, leaving that individual much lower income. Overall, the government should not have wriggle room with public cash benefits.
How we deal with the current entitlement issues is indicative of future reform decisions. They are there to lift the very poor out of homelessness, and support our senior population, but we must think of future generations. Nothing can be accepted to simply workout. If there is one constant in American history, it’s change. Population change, social change etc. We need to be able to adjust programming realistically to fit the demands of the people. Agility in government is not a notorious trait, but facing budget crises, might provide the necessary catalyst for change.
