Tag Archives: Entitlement Reform

“Putting People First:” What Would Have Happened if the Clinton Agenda Had Been Enacted? by Gregory Hilton

My August 25th article outlined the six critical factors which led to a balanced federal budget in the late 1990’s. This happened on President Clinton’s watch so of course he is entitled to some of the credit, but he is also the person who diligently fought practically all spending reductions, as well as many of the policies that are now an integral part of his legacy. If his 1992 “Putting People First” agenda had been adopted the Clinton Administration would have left office with a large deficit.
It is important to reexamine the original Clinton agenda because it is so similar to President Obama’s current proposals. The major difference is that our outlook is far worse today. Our national debt is $11.7 trillion dollars and our GDP is approximately $14 trillion. Our debt to GDP ratio will be 85% by the end of this year and over 90% next year.
Liberal columnist John B. Judis of “The New Republic” best described the comparison between the Clinton and Obama agenda’s:
“I would draw a distinction between the Clinton of 1992-1994 and the Clinton of 1995-2000. There is enormous political continuity between the Clinton of “Putting People First” (his 1992 campaign manifesto drafted by Robert Reich and Derek Shearer) and today’s Obama administration.
“When Clinton was elected, the economy was in recession, and Clinton’s initial proposals (including a stimulus program, industrial policy, and national health insurance) anticipated what Obama has proposed during his first year. Like Obama, Clinton imagined himself as Franklin Roosevelt’s successor–even paying a conspicuous visit during his first hundred days to Hyde Park. . . after getting repudiated at the polls in November 1994, Clinton had to pursue a much more cautious policy for the rest of his six years. Clinton’s last six years were dominated by incremental reform and “new economy” boosterism. . . Obama is the president Clinton aspired to be in 1993.”
Based on Clinton’s original budget which he submitted in 1993, the deficits from 1995 to 1999 turned out to $902 billion less than the administration’s projections. That is what the deficit would have been if Clinton’s priorities had been approved by Congress and stayed in place. A major part of the reason why we achieved a balanced budget is that Republicans in Congress rejected many of Clinton’s spending proposals.
Because of Clinton’s veto, Republicans were not successful in cutting existing programs during the first two years, but after the 1994 election most of the expensive elements in the President’s domestic agenda were no longer feasible. The expansion of the 1990’s was not because of the administration’s economic agenda, but in spite of it. Some major elements of the Clinton agenda were as follows:
1) In 1993, President Clinton’s $19.5 billion stimulus program was stopped by a Republican filibuster which held despite four Democratic attempts to break it. Not one of the 43 Senate Republicans voted to cut off debate. The GOP emphasized that the stimulus added to the deficit instead of having its spending matched by cuts elsewhere in the budget. This was Clinton’s first serious legislative defeat.
2) The Congress denied the administration the sweeping nationalization of health care they sought during the first two years in office. The total new tax burden that was to be imposed under the Clinton Health Plan was a staggering $1.511 trillion over the first five years, according to the Congressional Budget Office. This included $1.384 trillion to pay for Clinton’s mandatory health alliances, would have entailed a new payroll tax of between 14% and 17% on every working American. In addition, the Clinton Plan would have imposed 17 other new taxes that would have cost $127 billion over 5 years, and $300 billion over ten years. Thus, the average American family would have faced a massive new tax bill of $3,056 per year to pay for Bill Clinton’s plan. The Administration also admitted that health insurance premiums would rise.
3) The budget Clinton submitted in January 1995 called for $12 trillion of new spending over the next seven years and this would result in annual $200-billion deficits. David Broder of the “Washington Post” described this budget buster as a “symbol of Clinton’s failed leadership.”
4) Similar to other Presidents, Clinton was unable to rein in entitlement spending. Social Security, Medicare and Medicaid were not reformed. In his first address to Congress in 1993 Clinton vowed to reform Social Security. He made the same pledge in his last State of the Union Address. President Clinton also promised to slow the growth of Medicare and Medicaid, but nothing happened.
If the Clinton Health Plan had been enacted it would have created new federal entitlements that would have exploded the deficit. By 1998, just the second year in which Clinton’s plan was to be in effect, the total cost of these government subsidies would have been larger than any federal program except Social Security and Medicare. This plan alone would have stopped the balanced budget.


The Politics of Social Security and Medicare by Gregory Hilton

This 2008 AFL-CIO brochure said John McCain would destroy Social Security. The union offered no alternative to saving the system.

This 2008 AFL-CIO brochure said John McCain would destroy Social Security. The union offered no alternative to saving the system.

“Saving Social Security and Medicare” has long been a winning issue for politicians. Survey research has consistently shown seniors worrying about the security of their benefits, and campaign ads focusing on a threat to the system are highly successful. Ironically the lawmakers who claim they are saving the system have actually wanted to do nothing at all.
These politicians really want to ignore the problem and pass it on to another generation. This has meant no progress on Capitol Hill, no meaningful reforms to the system, and our lawmakers have been ignoring looming problems by claiming there is no crisis in Social Security of Medicare.
In past years politicians were eager to spend Social Security surpluses on other programs. We are now well into another spending spree, but beginning this year the annual surplus will start to shrink. Politicians often talk refer to the Social Security Trust Fund, but what they don’t tell you is that it contains no actual assets. The Trust Fund has no money. It is just an IOU from one branch of government to another. It contains government bonds that are simply IOUs, a measure of how much the government owes the system.
Why is nothing being done? Former Speaker of the House Tip O’Neill’s (D-MA) observation about the politics of social security has proven to be correct. O’Neill said Social Security was “The third rail of politics, touch it and you die.” A Social Security compromise was achieved in 1983, but it is hard to imagine a similar initiative being passed by the present Congress.
It is politically very popular to ignore this crisis, and the Social Security track record is well known to politicians in both parties. This was a major theme in the 1964 Democratic landslide when GOP nominee Barry Goldwater and his surrogate Ronald Reagan both suggested that Social Security could have “voluntary features that would permit a citizen to do better on his own.”
President Lyndon Johnson’s campaign ran a TV ad showing a pair of hands ripping a social security card in half as a narrator says: “On at least seven occasions, Senator Barry Goldwater said that he would change the present social security system. But even his running mate, William Miller, admits that Senator Goldwater’s voluntary plan would destroy the social security system. President Johnson is working to strengthen social security.”
A group of wealthy California conservatives purchased a half hour of national television time to show a Ronald Reagan speech during the last week of the 1964 campaign. Goldwater managers balked because Reagan repeated criticisms of Social Security. Throughout the campaign Reagan said “For years we have been told we are contributing to an old age insurance fund which is being set aside for our retirement years. In fact, there is no ‘fund’ at all. It is a compulsory tax producing revenues Congress produces for any purpose it desires while letting the reserves needed for future benefits fall in the hole.” Goldwater ended up receiving only 38% of the vote, but the speech launched Reagan’s political career.
It can be argued that Social Security was responsible for Reagan’s loss of the 1976 Republican presidential nomination. President Gerald Ford said Reagan’s proposal to make aspects of the system voluntary would be harmful, and he used this theme to narrowly defeat the Californian in the Florida primary. Ford received 53% of the vote statewide, and 60% among those 65 years and older.
President Jimmy Carter wanted to avoid a debate with Reagan in 1980. He agreed to only one joint appearance and this debate was held on October 28, 1980, just one week prior to election day. Social Security was one of the major issues. In his memoirs Reagan said “The debate went well for me and may have turned on only four little words. They popped out of my mouth after Carter claimed I had once opposed Medicare benefits for Social Security recipients. It wasn’t true and I said so: ‘There you go again . . .'”
Carter said Reagan “began his political career campaigning around this nation against Medicare. . . Although Governor Reagan has changed his position lately, on four different occasions he has advocated making social security a voluntary system, which would, in effect, very quickly bankrupt it.”
Reagan responded by saying he supported the alternative Medicare which was being debated in 1964:

Now, again this statement that somehow I wanted to destroy it, and I just changed my tune, that I am for voluntary social security, which would mean the ruin of it.
Mr. President, the voluntary thing that I suggested many years ago was that a young man, orphaned and raised by an aunt who died, his aunt was ineligible for social security insurance, because she was not his mother. And I suggested that if this was an insurance program, certainly the person who’s paying in should be able to name his own beneficiaries. And that’s the closest I’ve ever come to anything voluntary with social security.

Social Security had eleven ‘deficit’ years between 1960 and 1980. At the start of his administration, with Social Security teetering on the brink of insolvency, Reagan attempted to push through a reform agenda. His first message to Congress on this subject in 1981 said: “As you know, the Social Security System is teetering on the edge of bankruptcy. Over the next five years, the Social Security trust fund could encounter deficits of up to $111 billion, and in the decades ahead its unfunded obligations could run well into the trillions. Unless we in government are willing to act, a sword of Damocles will soon hang over the welfare of millions of our citizens.”
In 1981 a bipartisan National Commission on Social Security Reform was established by Reagan and chaired by Alan Greenspan. The Democratic Congress blocked all reform proposals prior to the 1982 election when Social Security returned as a major issue.
The nation was coping with a recession and Democrats won 26 seats. Progress did occur in 1983 and the end result was a $165 billion tax increase over seven years which dramatically increased payroll taxes on employees and employers.
The payroll tax pays for Social Security and Medicare hospital insurance. For the first time, Social Security benefits on upper-income recipients were taxed, and the retirement age was raised from 65 to 67. These changes did not resolve the long term structural problems, but they bought time, which was unfortunately squandered. The public was told that the extra revenue would be used to build up a trust fund dedicated to the preservation of Social Security benefits, and the system’s future would be secured. This was the only substantive Social Security reform of the century.
President George W. Bush made Social Security and Medicare reform his signature issue in 2005 but all of his attempts to save these systems met with a stonewall of opposition on Capitol Hill. It was a smart move politically and combined with opposition to the Iraq war, the end result was a Democratic Party capture of both the House and Senate in the 2006 elections.

The Social Security Crisis is Almost Here by Gregory Hilton

Thousands of Protests Against Social Security Reform Were Held in 2005 and 2006

Thousands of Protests Against Social Security Reform Were Held in 2005 and 2006

In early 2005 President Bush mounted a 60-day, 60-stop public relations blitz. Its goal? To convince the public that Social Security is headed for bankruptcy and that immediate reforms were essential. He warned that tides of baby-boomers headed for retirement would cause an economic tsunami, and he advocated privatized investment accounts. The response from Capitol Hill was “Social Security funds are not in crisis. Claims that they are rely on unrealistic predictions about future economic conditions.” During Bush’s 2006 State of the Union address, Congressional Democrats wildly cheered their own obstructionism in blocking the reform effort.
The Trustees of the Social Security Administration are now telling us they are in a dire situation and will start running in the red in 2016. According to The New York Times, “The report shows Medicare has become more fragile as well and is at greater risk than Social Security of imminent fiscal collapse. Starting eight years from now the health insurance program will be unable to pay its hospital bills.”
This is a trillion dollar crisis. Without entitlement reform tax rates will have to be doubled. There was a serious effort to reform Social Security and Medicare in 2005 and 2006 and reports of impending insolvency of both programs have been made numerous times. The situation is now far worse.
In 2006, Senator Harry Reid (R-NV), the current Majority Leader, said:
“The so-called Social Security crisis exists in only one place — the minds of Republicans. In reality, the program is on solid ground for decades to come.” Reid had been responding to Bush’s warning:
“If we do not act now to avert that outcome, the only solutions would be dramatically higher taxes, massive new borrowing, or sudden and severe cuts in Social Security benefits or other government programs.” The Bush plan would have allowed people the option to manage 18 percent (one of six dollars) of their Social Security as an IRA (Individual Retirement Account) providing individuals the option of their investments, including stocks, bonds, mutual funds, gold or any other commodity to gain a higher percentage of return than the 2 percent annual return they would receive from the government. This would historically increase the amount of revenue into the program, which needs to hold funds separate from other government funds.
The reforms were blocked on Capitol Hill, no alternative solution was offered, and this was a major issue for the Democrats when they captured control of Congress in 2006.
They would never admit a problem existed. In both the 2004 and 2006 campaign, the Democrats made allegations that the Republicans were going to stop sending retirees their Social Security checks, attempting to use their scare tactics to gain votes from the elderly.
In March of 2000, Al Gore stated in reference to Social Security: “if it ain’t broke, don’t fix it. Shore it up the way we always have.” Senator Charles Schumer (D-NY) said Social Security should get “fine-tuning” rather than a replacement “with something completely different.”
In the meantime, Social Security has amassed $4 trillion of unfunded liability and if major changes are not made quickly, the government will only be able to pay 70 cents for each dollar of promised benefits. The Social Security Trust Fund contains no actual assets. Instead, it contains government bonds that are simply IOUs, a measure of how much the government owes the system.
According to Bruce Bartlett in “Forbes,” “The total unfunded indebtedness of Social Security and Medicare comes to $106.4 trillion. . . Thus federal income taxes for every taxpayer would have to rise by roughly 81% to pay all of the benefits promised by these programs under current law over and above the payroll tax.”