A word for entitlements

April 05, 1994|By Robert Kuttner

TICKING away offstage is a political time bomb called the Bipartisan Commission on Entitlements. President Clinton agreed to set up the commission last August, as the price of getting an influential Democratic deficit-hawk, Sen. Bob Kerrey of Nebraska, to support his budget. The panel will report next December, and its recommendations are likely to be a major embarrassment to Mr. Clinton.

The 32-member commission, chaired by Mr. Kerrey and Republican Sen. John Danforth of Missouri, is dominated by people who think "entitlements" -- namely Social Security and Medicare -- are the devil's own instrument. The commission's executive order mandates it to identify "potential long-term budget savings" in entitlement programs. Yet the Clinton administration's own top legislative priority is the first major new entitlement in a generation: universal health insurance.

A majority of the commission's congressional members voted for a constitutional amendment to balance the budget. The White House, by contrast, labored mightily to defeat that amendment, by a narrow margin. It has set itself a trap, and compounded the damage by being careless about the commission's membership.

The commission's executive director, appointed jointly by Senators Kerrey and Danforth, is Fred Goldberg, former IRS commissioner in the Bush administration. Its chief of staff is Mark Weinberger, former tax counsel to Senator Danforth.

Of the other members, 20 were named by Democratic and Republican leaders of Congress. Ten were named by President Clinton. Even Mr. Clinton's appointees include prominent Republican fiscal conservatives, most remarkably investment banker Peter G. Peterson, who has spent the past decade warning that entitlements are bankrupting America.

Mr. Peterson was urged on Mr. Clinton by fellow Wall Streeter Robert Rubin, who heads the president's National Economic Council. To get a flavor of the snare Clinton has set for himself, consider Mr. Peterson's new book, "Facing Up: How to Rescue the Economy From Crushing Debt and Restore the American Dream."

Mr. Peterson begins with the premise that debt is responsible for America's economic slowdown and that entitlements are the cause of excess debt. But this is improbable on both counts. On the eve of a 20-year boom in 1945, the national debt relative to total national income was twice its current level. And the biggest entitlement, Social Security, runs a large budget surplus.

Mr. Peterson admits that thanks to the Clinton deficit-reduction program the deficit will decline to just 2.2 percent of gross domestic product in 1998. But he uses very pessimistic economic assumptions to show the deficit rising to an improbable 10 percent of GDP by the year 2010, and the debt rising to 112 percent of GDP by 2020.

In truth, nobody has a clue what the national debt will be 25 years into the future. There are simply too many variables -- including whether Congress passes health reform. But while Mr. Peterson acknowledges that inflation in health costs is a prime culprit in the rising deficit, he opposes universal health insurance even though countries with universal coverage spend less on health care.

Mr. Peterson's main remedy is to dramatically slash entitlements by taxing all benefits received by households with incomes over $35,000. Mr. Peterson calls this policy an "affluence test."

What we have here is really an ideological assault on social insurance, masquerading as budgetary concern. If we value Social Security and Medicare but desire greater deficit reduction, there is an alternative to singling out social insurance benefits for extra taxation. Let's just raise top tax rates on high income taxpayers generally -- like Mr. Peterson!

Social insurance -- most notably Social Security and Medicare -- is part of what binds us together as citizens rather than as merely winners and losers in a free-market lottery. Since FDR, social insurance has also helped bind the Democrats to the wage-earning electorate, and in a way that transcends divisions of race and class. Not even Ronald Reagan dared attack Social Security, though his aides wanted to privatize it.

And Social Security is our most effective program of income redistribution. It and Medicare are responsible for the dramatic reduction of poverty among the aged. Social insurance, in short, is the political and moral high ground of American liberalism.

It is no mystery why Republican conservatives would mount an attack on entitlements. Slashing entitlements comports with the GOP free market philosophy, and has the political virtue of dividing Democrats from their electoral base. But it is harder to fathom why the Clinton White House would provide the vehicle for this assault.

Recently, Rep. Marjorie Margolies-Mezvinsky, the freshman Democrat who gave Mr. Clinton a crucial vote when his budget was before the House, was back in her Pennsylvania district electioneering. The first part of her speech was a stirring call for universal health insurance. She concluded her remarks with a pledge to "cut entitlements." Hello. . . .?

In the past, voters have looked to the Democrats to defend Social Security and Medicare. But what will Mr. Clinton do when "his own commission" recommends massive cuts? With this sort of confusion about first principles, no wonder voters have a hard time telling the difference between the two parties.

Robert Kuttner writes a syndicated column on economic matters.

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