The big difference between the budget compromise put forward by Senator Harry Reid last Friday and the version that came together on Sunday is that the Reid bill met the main demand of each party: For Republicans, there was no mention of tax increases. For Democrats, there were no cuts to entitlement programs (Social Security, Medicare and Medicaid). All the cuts would come from the category of spending known as discretionary, where Congress decides each year what to spend. The emerging alternative, which provoked a sharp backlash from many congressional Democrats and liberal activists, includes a commission which would have some power to force cuts in entitlement spending.
The difference reveals where liberals draw the line. It is not about spending or a government actively investing in economic growth. It is about a particular form of spending: entitlements. There is an odd asymmetry between the two parties’ non-negotiable demands. For the right, tax increases in any form are off limits. But for the left, it’s a particular spending category that’s become sacred. Rallies have been held to protect entitlements. Coalitions have been formed. But how did a particular category of spending, entitlements, come to matter more than who it helps or what it does?
Once the process of negotiating on long-term deficit reduction has begun, the only alternative to cutting entitlements or raising taxes, as in Reid’s original plan, is to place all the burden on discretionary spending. Reid’s original plan assumed significant cuts in defense spending from ending the wars in Iraq and Afghanistan. But the budget won’t force an end to those wars, and if they continue, that spending will not be cut. Thus most of the burden of Reid’s discretionary spending caps would fall on the category known as domestic discretionary spending. Even though that category includes just about everything the government does other than defense, it represents only one tenth of the total federal budget over the next decade, and has been unchanged, adjusted for inflation and population growth, since 2001. Even deeper cuts to domestic discretionary will result in real cuts to everything from home heating assistance to cancer research to K-12 education funding.
The reason why these cuts are deemed acceptable, while proposals to curb entitlement spending regularly elicit liberal outrage, isn’t really hard to explain: The three big entitlements have symbolic power as the monuments of the New Deal and the Great Society. Social Security survived the attacks of Ronald Reagan and George W. Bush, and the defeat of Bush’s privatization plan, when Democrats simply refused to play along, was a key moment in the revitalization of progressive politics. Medicare survived Newt Gingrich’s plan to have it “wither on the vine” and, apparently, Representative Paul Ryan’s clumsy recent assault as well. And needless to say, the programs are fundamental to the economic security of all seniors, as well as younger people who depend on them for survivor or disability benefits, or as a base of security to plan for the future. No limited discretionary program comes close to the scale of support provided by the entitlements.
They also have an outsized political significance. While each discretionary program, whether Pell Grants or HeadStart, assists a particular group of vulnerable people, the entitlements are universal. Even Medicaid, the health program for the poor, provides nursing home care for millions of seniors who were middle class. They exemplify the political sociologist Theda Skocpol’s aphorism that programs that reach “a broad cross-class constituency” last and cement an allegiance to government. More immediately, Democrats are eager to go into 2012 with an uncluttered message, inspired by their successful special-election campaign in a Republican congressional district in New York: We protect Social Security and Medicare. Republicans voted for Paul Ryan’s plan to dismantle Medicare. (That’s assuming anyone still remembers the Ryan plan.)
But treating the entitlements as sacred comes at a huge cost in all the other programs. While there’s surely waste in domestic discretionary programs, from agriculture subsidies to the occasional National Science Foundation grant that sounds silly, it also includes education, energy research, transportation—and basically everything that constitutes the investment in economic growth that we need far more than we need budget austerity. And while it might make some sense to insist on holding Social Security untouchable (its long-term funding shortfall is self-contained, and won’t affect the larger budget picture unless it is still unresolved in two decades), it’s very strange to take the same approach to Medicare, which is projected to consume 5.5 percent of GDP by 2035, up from 3.6 percent today, without providing better services or serving significantly more people. Protecting the current Medicare cost curve cannot be considered a fundamental progressive principle. While there are bad ways to reduce Medicare spending, such as raising the eligibility age without an alternative universal health program to fill in for those younger seniors (an option that Obama and Boehner reportedly considered in their “grand bargain” sessions), there are also plenty of good ways to reduce Medicare costs, such as by bringing down overall health inflation, bundling services, and dozens of more technical measures.
A “clean” political message on Medicare isn’t possible anyway. Obama already cut Medicare spending in health reform, and Republicans didn’t hesitate to attack him for it. The distinction between the Ryan plan, which dismantles Medicare and gives seniors a coupon in its place, and modest, responsible changes to Medicare is the only political message available, and while it’s not black and white, let’s assume that voters are smart enough to understand it.
Finally, the ultimate victim of a budget deal that holds entitlements sacred is going to be entitlements themselves. For years, advocates of budget austerity such as the billionaire Peter G. Peterson and his eponymous foundation have sought to construct an alliance of the beneficiaries of discretionary programs—advocates for children, education, health research, etc.—to argue that their priorities are threatened by an “entitlement crisis.” It wasn’t true. But if Medicare spending were protected and allowed to almost double over ten years, while domestic programs were squeezed by the Reid caps, it would certainly become true. The political alliance to cut those programs would become broader and more powerful, and the eventual cuts could be clumsy or destructive. It’s the nature of entitlement programs, especially Social Security and Medicare, that the earlier changes are made, the less painful they have to be.
The White House has called for a “balanced” approach to deficit reduction, meaning both revenues and spending cuts should be part of the deal. A deal without revenues or entitlement cuts, one that puts all the burden on those domestic programs, is far out of balance and would hardly have been a victory for progressives. It would have been a disaster for the economy and for the idea of an active government that can expand the scope of prosperity.
Mark Schmitt is a senior fellow at the Roosevelt Institute and former editor of The American Prospect.