The Entitlements Game

And, they add, the key to debt control is slashing “entitlement” programs.

The Republicans have set a trap, and President Obama is walking right in.

Republicans are playing to a difference in the way people perceive entitlements inside and outside the Beltway. In the country at large, some people think that the term “entitlements” refers to programs for poor people, government giveaways to which people become “entitled” when they fall on hard times. Prototypes are food stamps (now called SNAP), unemployment, and Medicaid. Skeptics are sure that some on these programs are slackers too lazy to work. These freebies are carefully distinguished from Social Security and Medicare, programs in which workers earn benefits over a lifetime of work, both of which are strongly supported by voters across the board, Republicans — even tea party members — as well as Democrats.

Washington sees things differently. There, everyone understands that entitlements are simply government programs not funded by annual appropriations: instead, each person who applies for the benefit and qualifies, receives it; the Treasury pays whatever that comes to. From this vantage point, there is no difference between food stamps and Social Security. Indeed, Republican leaders see all entitlements as redistribution — from the haves to the have-nots, from the makers to the takers, and in the case of Social Security and Medicare, from the young to the old.

The big money — where conservatives believe cuts could make a real dent in the deficit — is in Social Security and Medicare: in 2011 the two programs alone accounted for some $1.2 trillion, close to 30 percent of the budget. Food stamps, by contrast, came to about $78 billion.

Although conservatives want big cuts in Social Security and Medicare specifically, Republicans up for election prefer to attack “entitlements” generally, hoping some people will still think of food stamps. It helps that some politicians (even some Democrats) occasionally refer to Medicare and Social Security as the “social safety net,” as if they too were mostly for the poor.

But President Obama…knows the arithmetic, and meaningful “entitlement” cuts mean cuts to Social Security and Medicare. He outlines just such cuts in his budget this week.

Bliss! The Republicans get a two-fer: Speaker John Boehner can pocket the cuts he wants, and later denounce Obama to furious voters for cutting Social Security and Medicare.

Republicans got a leg up in 2010 using just this strategy.

There is a reason voters support Social Security and Medicare by large majorities, even if it means raising taxes: These two programs are the most important protection middle class seniors have against poverty and disease in old age, when they can no longer work or (with 7.6 percent unemployment) find a job. Between fees, the stock market crash, and job loss, many 401(k)s have collapsed. Wages have been stagnant for a decade; interest rates have been zero for years, making it almost impossible to save. Something like 70 percent of seniors depend on Social Security for the majority of their income.

Congress passed Medicare in 1965 precisely because, even then, older people could not get health insurance.

Voters are correct: Medicare and Social Security are not charity, or transfer payments: they are public insurance programs essential to the survival of the American middle class.

Moreover, even though Republicans lump them together as entitlements, Medicare and Social Security are distinct, with different impacts on the deficit.

Although Social Security is technically a public insurance program, it is essentially a defined-benefit public pension plan: workers pool their money in a large fund, and during retirement, receive a guaranteed monthly benefit based on salary and number of years worked. Those who die early pay for those who die late. Actuaries can project future costs accurately for several decades; the system is funded to pay full benefits out to 2035 without adding a dime to the national debt.

Medicare is more like ordinary insurance, there if you need it, though not everyone will. Unlike Social Security, Medicare will drive up deficits unless its costs are controlled. But much of the rising cost is due to the ever-increasing prices of health care services for everyone. The Federal government can solve most of this problem by using its leverage to push prices down, as elsewhere in the developed world: there is no need to cut benefits.

President Obama’s offer to cut Social Security and Medicare will cause nothing but grief to seniors, their families, his party and himself. He needs to take it off the table now. If the Republicans want such cuts, let them demand them by name.

This article appeared in print on page 10 of the April 12th, 2013 edition of Hamodia.