2015 May 17 Sunday
Ross Douthat on Mike Huckabee, Anti-Reform Conservative

Mike Huckabee represents retiree entitlements protecting conservatism. Conserve old age entitlements spending and oppose anything that competes with it.

So what competes with old age entitlements spending?

  • Military spending. A big conservative favorite.
  • Scientific research spending. Definitely a public good that benefits everyone and on the decline as it gets squeezed out by entitlements.
  • Roads and bridges. Again, a public good that benefits everyone. Though roads could be turned into toll roads.
  • The welfare state for the lower classes. This is the biggest vote getter that threatens to make the Republican Party into has-beens. Democrats are doing all they can to boost the size of the lower class with low skilled immigrants and plenty of business interests support this.
  • Education. Not a terribly effective but popular way to spend federal dollars. The big spending school districts (can you say "Baltimore"? sure) have bad outcomes while Utah has great bang for the educational buck.
  • Everything else.

The US military is going to be one of the big losers in all this. The US military is now top of the pops. But a growing China is in the process of making the seas near China dangerous places for the US Navy. But even before the cash crunch US military effectiveness has already started looking quite tarnished because in spite of lots of spilled blood and treasure it was not able to bring peace, love, and understanding to Iraq, Afghanistan, and other parts of the Islamic neighborhood. Nation building, counter-insurgency strategy and shock and awe did not produce desired outcomes. But does it matter?

Infrastructure spending and scientific research spending are going to be losers as well. I expect more increases in taxes as well.

It comes down to the old folks and poor folks. The old folks and the poor folks are both growing in number. Poor folks are growing because they are more fertile, they coming coming in from other countries, and because industry is automating the sorts of jobs they used to work at. The old folks are a growing proportion of the population due to lower fertility rates and longer life expectancies.

Since their numbers are growing the old folks and poor folks could each individually get less from the government even as the total amount spent on their groups grows.

So what's going to happen? Means testing for old folks benefits seems like a matter of when, not if. How long until higher net worth people have to pay more for Medicare and get less in Social Security? Perhaps a large financial crisis in the 2020s will force this.

Fast economic growth used to allow the government to hand out more stuff each year without taking higher percentages away from each person. But economic growth has become too anemic for too many years and now the zero sum nature of the game as become clear and politics has become more bitter and negative. I expect this to get much worse before it gets any better.

Share |      By Randall Parker at 2015 May 17 03:48 PM 

Black Death said at May 18, 2015 9:03 AM:

Agree. Crunch time is coming. It is worth noting that the old folks feel that thay have paid for the benefits they receive, although, on the average, they get back more than they paid in. The current Social Security tax is 12.4% of total income, evenly split between employer and employee (unless you're self-employed, in which case you pay the whole thing). This is currently capped at $118,500, which means that the maximum amount paid is $14,694. That's a fair amount of change, and don't kid yourself about who really pays the employer contribution. Additionally, 50% of Social Security benefits are taxable for a married couple for combined income between $32,000 and $44,000 and for 85% of benefits over $44,000.

For Medicare, the current tax rate is 2.9%, evenly shared by employee and employer. Additionally, couples filing jointly pay and additional tax of 0.9% for incomes exceeding $250,000. Unlike Social Security, this amount is uncapped.

For decades, Social Security looked good. The program took in more money than it paid out, and, of course, the government spent the rest. This spending constitutes the "Trust Fund," which is expected to peak around 2021. It really amounts to no more than an accounting device which allows the government to spend general revenues on Social Security. When it is depleted (estimates vary as to the date), the government will be limited by law to paying out no more in benefits that is taken in revenue, but nobody thinks that is ever going to happen. Congress will just pass another law allowing it to be funded from general revenues.

The first Social Security beneficiary, Ida May Fuller, a spinster school teacher and legal secretary from Vermont, got her first SS check in 1940. In two months, she got back more than her total contribution, and, since she lived to be 100, she did very well. No wonder SS was initially so popular. In 1940, SS benefits were taken at age 65. Period. There was no early retirement and no delaying benefits to receive a higher amount, both of which are now allowed. In 1940, the life expectancy for American men was 62 and, for women, 65. So most men and about half of the women got nothing in return for their SS contributions. How times have changed! If SS benefits had been linked to the increasing life expectancy, there would be no looming crisis.

So there are already certain redistributionist features built into medicare and SS, and they will probably get worse. But there are too many aging Baby Boomers to allow any serious changes - the elderly are the demographic with the highest voter turnout. The politicians know this. The Democrats will probably try to protect the "entitlement" programs for the poor, but this may be more contentious. Programs without a large consitiuency such as the military, are going to be in trouble.

Randall Parker said at May 21, 2015 7:35 PM:

Black Death,

Agreed that DOD is going to take a big hit. But will old folks be able to protect what they are getting once the crunch time comes? Cutting DOD in half won't do enough. I'm expecting an acceleration in the rising age for eligibility for Social Security. Age 70 seems a likely new first age for eligibility. Medicare will be cut by making docs jump thru more hoops to get the money.

Black Death said at May 22, 2015 3:44 PM:

RP -

Agree that cutting the military, while a step in the right direction, won't be nearly enough. The age of eligibility for SS is already rising and will probably continue to do so (as I noted previously, if the age had been indexed to life expectancy from the beginning, there would be no problem today, but nobody was that smart back in the 1930's). Medicare will probably be indexed too. The politicians are afraid to cut reimbursement to doctors because most of them have all the patients they need, and this would make them stop accepting Medicare folks. The old people always blame the politicians for this, so there won't be any real Medicare cuts other than perhaps increasing the age of eligibility. The recent bipartisan passage of the Medicare SGR "doc fix" shows that Washington is very cautious about this issue.

There are a scad of other programs that should be cut or eliminated, but most of them have constituencies. Some of them, like the egregious farm, flood insurance and "clean energy" subsidies, even have bipartisan support, making them almost impossible to deal with. Poor people receiving various forms of dole rarely vote for Republicans, so the GOP may try to take a whack at these. The Democrats will fight to defend the goodies for their little dahlings, so some sparks may fly here. But I still think the elderly are too numerous and politically powerful for their programs to be reduced by other than a gradually increasing age of eligibility.

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