Austerity Cuts vs. Real Entitlement Reform

In his latest attempt to cajole Republicans into raising taxes, Obama has called for a budget plan that makes some cuts to Medicare providers and subjects Social Security payments to the chained CPI.  John Boehner was correct to reject this ploy of holding entitlement savings hostage for tax increases.  However, he has come close to negotiating such a deal in the past, and there are some GOP officials who are saying they would still agree to such a trade.  Lindsey Graham has already expressed encouragement over the proposal.


We must remember that even to the extent we would be willing to trade tax increases for something transformational, Obama’s proposal is not entitlement reform, and it certainly doesn’t represent something transformational.  It is a proposal of austerity cuts to the status quo.

The problem with entitlements is not limited to the budgetary cost to the federal government, although that is certainly a major concern.  The problem with our entitlements – in the case of Medicare and Medicaid – is the lack of choices, free market forces, and the inflationary cost of healthcare to the individual.  The problem with Social Security is the lack of private property rights, dreadful rate of return, lack of individual liberty, and hopeless dependency on government.  Limiting benefits to the chained CPI might be fine for the government option, but it should not replace policies that offer more choices.  Means-testing benefits might save money, but we must not forget that Social Security is already means-tested, as its benefit formula is tendentious towards low-income earners relative to what they contribute to the program.


Consequently, any real entitlement reform must follow the principles of free markets, limited government, and individual liberty.  The budgetary problem will self-correct through any conservative reform.  We are all rightfully outraged that Obamacare will force us to purchase health insurance, but where is the outrage over the lack of choice and control over our own retirement and healthcare as seniors?  We don’t need European austerity measures if they will not accompany a pro-growth plan that encourages private ownership and choice in retirement security.

With regards to Medicare, conservatives must remember that the goal of healthcare reform is not to merely cut its costs to the federal budget; it is to alleviate the burden of government-run healthcare on the entire healthcare sector.  Merely reducing payments to healthcare providers under Medicare, Medicaid, and veterans’ programs, without overhauling the system with private options and HSAs, will only force doctors to drop these patients.  Other reforms would include block granting Medicaid to the states and allowing them to use funds to convert Medicaid and Schip to private insurance vouchers and eliminating the tax incentive gap between employer-based insurance and personal insurance.


If Democrats want to put real entitlement reform on the table, then we can talk about paying the ransom of high taxes.  Paying this ransom for a few austerity cuts that will never pan out without structural reforms is just plain dumb.

Cross-posted from The Madison Project


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