Paul Ryan’s White Whale Is America’s Most Important Unfinished Political Task

We have a pressing national problem that neither Trump nor Congress seem interested in solving

As we gaze into the murky future of the 2018–2020 political landscape, the circus that is the Trump administration and the semi-functional theater that is our current Congress have concealed a possibility that could have significant consequences: GOP House Speaker Paul Ryan may retire soon.

After years of resisting the Obama administration and planning for the day he might finally enact his long-dormant agenda, Ryan has finally achieved one half of his core governing vision: the sweeping tax reform bill that passed in late 2017. But his political dreams were never supposed to stop at cutting taxes. The centerpiece of his political and governing vision, his Moby-Dick-like quest to reform entitlements, sought by fiscal conservatives for at least a generation, remained unfulfilled.

The ongoing problem for Ryan has been that neither President Trump, nor Senate Majority Leader Mitch McConnell, nor many moderate Republicans, nor congressional Democrats seem interested in any kind of significant entitlement reform. During the campaign, Trump promised not to touch any of the major entitlements Ryan so desperately wants to reform.

Ryan seems to think at least half of that equation is changing, according to the Washington Post:

“We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and the deficit,” Ryan said during an appearance on Ross Kaminsky’s talk radio show. “… Frankly, it’s the health care entitlements that are the big drivers of our debt, so we spend more time on the health care entitlements — because that’s really where the problem lies, fiscally speaking.”

Ryan said that he believes he has begun convincing President Trump in their private conversations about the need to rein in Medicare, the federal health program that primarily insures the elderly…. “I think the president is understanding that choice and competition works everywhere in health care, especially in Medicare,” Ryan said. “…This has been my big thing for many, many years. I think it’s the biggest entitlement we’ve got to reform.”

If Ryan is right, then it is possible that the GOP-controlled Congress and President Trump could enact serious entitlement reform in 2018, and Ryan may finally get some version of his white whale. Whether or not Ryan will ever achieve his long-sought-after goal, he has, at times, seemed the only major political figure in Washington with the desire and will to change this mammoth portion of federal government spending.

Is Ryan right to be so concerned with reforming the systems that seem to be keeping our elderly out of poverty by simply giving them back the money they paid into the system in the first place? Why is reform even necessary, never mind desirable? More specifically, what are the dangers of ignoring entitlement reform for the national fiscal house?

It might seem to be predominantly the territory of small government conservatives and free market types to worry about the long-term effects of entitlement spending, but those in favor of more robust discretionary spending would also be wise to worry about the unabated expansion of non-discretionary (entitlement) spending as a percentage of government outlays.

According to the Heritage Foundation, based on Congressional Budget Office projections, “without any changes, mandatory spending, including net interest, will consume three-fourths of the budget in just one decade.”

Given how hard it is to sell tax increases to the American people, it should worry pro-government-spending types that less and less of the federal spending pie will be available for anything other than entitlements in the coming decades without some kind of reform. Additionally, as Heritage also points out,

High federal debt puts the United States at risk for a number of harmful economic consequences, including slower economic growth, a weakened ability to respond to unexpected challenges, and possibly a debt-driven financial crisis. Furthermore, most of the debt issued is to pay for more consumption spending. Unlike spending on investments, consumption financed through debt will lower the standard of living for future generations.

Again, this may not seem like cause for concern for my left-of-center friends, but consider some of the unforeseen impacts increased levels of entitlement spending can have on other areas of public concern. I wrote about this recently in a piece on the rising costs of college:

Programs like higher education spending will be crowded out by higher levels of spending on mandatory programs, one of the hidden costs of the expansion of government entitlement programs such as the ACA expansion of Medicaid. In other words, college students and their families are, in part, footing the bill for providing more people with “free” healthcare. Students are paying higher costs, because all but the most wealthy and elite institutions are passing those costs onto them.

Whether through rising tuition costs at state-run educational institutions, higher federal taxes, or higher fines and fees by local governments seeking additional revenue, non-wealthy people will be affected by increasing non-discretionary spending at all levels of government.

The economic case can be argued from both sides (pro and con), but there is also a moral argument to consider: The very nature of our current entitlement programs (especially old-age programs like Medicare and Social Security) can be construed as inter-generational theft. As Eric B. Schnurer wrote recently at the Atlantic, when FDR introduced these programs, they were sold more as pensions than as welfare programs:

Americans were given Social Security numbers, looking like a bank account, and are still sent regular “statements” of their “contributions” and what the projected payouts on those supposed-savings look like. (Medicare was crafted to create the same impression.)

This is all a fiction.

Because of the carefully cultivated impression that beneficiaries are simply receiving back their “own” money, plus investment gains, Social Security and Medicare are regarded as politically distinct from welfare or other benefits the recipient didn’t “earn.” …. But it is hardly “theirs.” The average Medicare recipient receives treatment totaling the full amount of his or her lifetime contributions, plus a market rate-of-return, within the first two years after retirement; after that, it’s all income transfer from other Americans. Over the remaining years of life, the average retiree can expect to receive Social Security benefits amounting to a roughly 30 percent bonus over what she paid into the system (plus interest) — all from Americans currently working. Even overtly welfare-ish Medicaid payments — originally intended to provide care for poor children — now go largely to long-term care for mainly middle-class elderly.

Essentially, then, our major entitlement programs don’t just pay back “contributors” what they themselves put up for their own pensions and old-age care: They represent the grandparents if not “stealing” from the grandchildren, as Vonnegut put it, then at least living off them while pretending not to. And with “grandparents” living longer and Boomers retiring at the rate of one per hour, spending on entitlements is growing and consuming an ever-larger share of both government expenditures and the nation’s economy as a whole.

Since roughly the time the first Boomers started retiring, the entitlement system has been paying out more in benefits than it takes in from dedicated payroll taxes…. after 2034, the trust fund reserves — the assets built up over the years for the Boomers’ retirement from their own contributions — will be fully depleted. From then on, the system will run solely on payments from those in the workforce — and, at current rates, these will be only enough to pay about three-quarters of scheduled benefits. Either taxes must go up, or benefits must come down.

The moral case that Schnurer highlights is that, while elderly poverty rates are no longer the concern that they were in FDR’s day, and that, further, the two richest cohorts of American citizens are retirees and near-retirees, younger Americans are shouldering more and more of the burden of both poverty and covering the expenses of the elderly. At bottom, the math is inescapable:

When Social Security was launched, there were 42 workers paying Social Security and Medicare payroll taxes for each individual retiree. Today, that ratio has fallen to just under three-to-one, and will fall again as the Boomers retire.

In other words, there are fewer and fewer workers per retiree, as our senior citizens live longer and healthier lives, and as people have fewer children than previous generations. Schnurer also relays what the Pew Research Center’s Paul Taylor has made clear:

Fifty years ago, the government spent $3 on public investments that spur economic activity for every $1 it spent on entitlements. Today, that ratio has flipped, and within a decade the government will be putting $5 into entitlements for every $1 that goes into roads, education, scientific research, and the like.

As our government spends more and more on entitlement programs, and less and less on investments in education, infrastructure, and research, the economy that makes all of our entitlement programs possible in the first place will almost inevitably slow, weaken, and underperform. This is the problem with government spending in general: The Federal Government is very important, but it can’t “walk” on its own very well; it has to ride the “horse” of the economy to get where it needs to go.

This is what lies at the heart of Paul Ryan’s governing vision — if the government gets too big, too expensive, too burdensome, then it starts to suck the life out of the host it relies upon for its very existence.

Paul Ryan may be wrong to think this; America may be able to continue to spend ever-increasing amounts on entitlements, either without raising taxes (resulting in skyrocketing debt), or by raising taxes (and betting that the economy will be able to soldier on under more burdensome conditions), but his argument should not be ignored or set aside as motivated by a desire to fatten the pockets of the wealthy. There are substantive economic concerns here that require an answer.

In one of the many interesting twists in this debate, a number of conservative politicians and commentators have recently seemed far less interested in taming the deficit. At the turn of the new year, for example, the New York Times’ Ross Douthat admitted he had changed his views on the necessity of these kinds of reforms:

I was not the fiercest of deficit hawks, not a hard-money type or an inflation-panicker. But as a non-economist staring at Congressional Budget Office projections and at examples of fiscal crisis from Greece to California, it seemed reasonable to make deficit cutting a near-term priority from 2010 onward, to offset the surge of Great Recession spending with a period of belt-tightening.

But now I think this reasonable view was wrong. Not completely, in the sense that many of the deficit-reducing policies I supported — means-testing entitlement programs, eliminating tax breaks for the wealthy and upper middle class — I still support, because I think the money involved is presently misspent. But I was wrong in the priority that I gave the deficit relative to other issues, wrong to discern a looming “fiscal precipice,” wrong in some of the criticism I leveled at both George W. Bush and Barack Obama for failing to care enough about balancing the nation’s books.

If conservatives like Douthat now find Ryan’s push for fiscal and entitlement reforms to be less important than originally thought, where does fiscal conservatism go from here? According to Michael Warren and Haley Bird at the Weekly Standard, Ryan’s commitment to fiscal reform just may not be enough.

“At the end of the day, I’m the same old guy,” he told Bartiromo. “We’re doing the same old thing in the House, which is that we’ve got to have entitlement reform, and that is why we keep pushing for our health-care reform, that’s why we keep pushing for entitlement reform. Baby boomers are retiring, and we’re not ready for them.”

Ryan’s recommitment to fiscal discipline came just two weeks after Donald Trump delivered a State of the Union address in which neither the country’s $20 trillion debt nor the government’s trillion-dollar budget deficit earned a mention. It was one day after the White House released a $4.4 trillion budget proposal that made cuts but no reforms to Medicare, the entitlement program that most threatens our solvency. And it was in the middle of a week in which the president began touting an infrastructure proposal that includes $200 billion in new federal dollars.

The question seems to be, then, whether Ryan can convince Trump and his fellow Republicans that entitlement reform is important enough, and enough of a political winner, to pursue in a meaningful way. If he can’t convince enough of the GOP to follow him into the fiscal breach, all his talk about pursuing lasting fiscal solvency may end up being just that: talk.

There are political (McConnell) and substantive (Trump) resisters to reforming entitlements within the Republican Party. McConnell has prioritized legislative pursuits not likely to draw the sharpest contrasts between his party and the Democrats in 2018, and it just doesn’t get more polarizing than entitlement reform. For his part, Trump has shown an aversion to reforming entitlements. Fiscal conservatives always worried about this aspect of Trump’s political profile. Constricting government spending is a herculean political undertaking, since it’s so easy for opponents to demagogue, which means small government conservatives need all the help in the world to enact entitlement reform. If the president in power, despite being Republican, is against it in broad brushstrokes, what chance does it really have?

In the latest Trump budget, the administration is not even trying to balance the budget. Once a staple of Republican presidential budgets, there is no longer even the semblance of the budget getting to zero across a 10-year span.

Ryan has claimed that President Trump is starting to change his tune on entitlement reform. It may be that Ryan has found a way to inspire Trump to take on this issue. Trump has shown an interest in introducing work requirements for accessing Medicaid and welfare benefits, for instance. We’ll soon find out whether the Speaker of the House is finally able to get his white whale.