Opinion: It's Time to Reform Entitlements

Kevin McCarthy’s tumultuous battle with 20 GOP conference members led him to concede many policy points, which resulted in a large media stir. While there are various concessions less threatening to the status quo than others, one that has attracted particular attention is the assurance of spending cuts. 

A peer Parker Stava wrote in a recent piece that “one of the most dangerous demands” by the McCarthy hold-outs is the demand for spending cuts on entitlement programs in exchange for a debt ceiling increase. A debt ceiling increase is required for the United States to continue financing obligations made in the past. Unless it raises the debt ceiling, the government must divert money from other programs to avoid a catastrophic debt default. 

Entitlement programs are designed to be a safety net for citizens. They include but are not limited to Social Security, unemployment insurance, Medicare, Medicaid, and food stamps. Given that spending on entitlement programs and interest on the debt currently consumes over 70% of the federal budget, it’s quite perplexing that some people do not understand the necessity of entitlement reform when trying to balance the budget. The reality is that ending large budget deficits and paying down the United State’s handsome debt is only possible with meaningful entitlement reform. 

The federal debt of 32 trillion dollars is only the tip of the iceberg. Current actuarial estimates put the unfunded liabilities for Social Security and Medicare at $60 trillion and $103 trillion, respectively. These projections are quite daunting—However, fortunately, the spending on these programs has not yet occurred, which gives Congress the power to remedy this potential economic disaster with meaningful reform. 

There are many avenues that policymakers could take when reforming entitlements. Proposals such as reducing entitlement spending through the means testing of benefits and the partial privatization of unsustainable programs merit consideration. Moreover, policymakers could flatten benefits for social security, ensuring that the lowest earners get more and the highest earners receive less. 

Even further, individuals should be free to opt out of social security or, at least, put a portion of their Social Security payments in an IRA. Market-oriented reforms could put downward pressure on healthcare prices to address the healthcare crisis in the United States today. Ending the employer-sponsored insurance deduction, removing interstate restrictions on health insurance plans, and reducing subsidies to high earners are three steps in the right direction. 

Just by removing upper-income Medicare recipients, the United States could save 1.1 trillion dollars from 2023-2032. Not only would reforms like these improve the returns on social security payments, reduce federal spending, and lower healthcare costs via the free market, they would enhance every individual’s freedom to make retirement and healthcare decisions. 

Many will call these proposals immoral, lacking empathy, or dangerous; however, that is not true. What is unscrupulous is for the federal government to borrow this much money at the expense of future generations. With proper reform, health care will be of greater accessibility and affordability to all, and tangible assets will back retirements instead of shaky government guarantees. 

The new Congress must make a deal on the debt ceiling, including spending cuts and entitlement reform. The recent Speaker race has been a distraction from a real problem affecting Americans—However, the race also brought reform within the public eye. Meaningful entitlement reform would secure prosperity for future Americans, and the new Congress has a moral and fiduciary responsibility to consider it. 

"Money" by ismmelo2 is licensed under CC BY-NC-ND 2.0.