Why Mitch McConnell Is Right About Cutting Social Security

Truth is something that we are not used to hearing in the current political climate so it can come as a bit of a shock when a politician blurts out a harsh dose of reality. That was the case yesterday when Mitch McConnell confronted the American people with the bitter fact that the deficit is too large and the only way to cut it is by slashing the sacred cows of Social Security, Medicare and Medicaid.

“It’s disappointing but it’s not a Republican problem, McConnell told Bloomberg. “It’s a bipartisan problem. Unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.”

While it is not solely a Republican problem, the GOP has done little in the way of deficit reduction recently. This week the Treasury Department revealed that the deficit grew to $779 billion, its highest level since shortly after the Tea Party revolution. After trimming budgets during the Obama Administration, the Republican Congress enacted tax reform that stimulated the economy but slashed corporate tax revenues. At the same time, spending increased due to a larger military budget as well as increased interest payments on the national debt and increased Social Security spending.

The entitlement problem is so big that it really doesn’t matter how much cutting we do in other parts of the budget if we don’t reform entitlements. For example, the entire defense budget is only 14 percent of federal spending. The sum total of all foreign aid is only 1.2 percent of the federal budget.

The entitlement programs are at a crisis stage. The Social Security trustee report predicts that in only four years Social Security will begin to pay out more than it takes in. If nothing is done, only 16 years from now in 2034 the Social Security trust fund will be bankrupt.

The truth is that not even conservative voters really want to reform Social Security. Many conservatives have bought into the lie that the Social Security tax that comes out of their paychecks is a contribution that goes into their account. In reality, involuntary Social Security “contributions” go into a trust fund, per the Social Security Administration, from which benefits are paid from the trust fund and the excess “must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government.” This is another way of saying that the Social Security benefits are paid from current contributions. Any funds left over are loaned to the federal government, which must pay them back with interest.

Voters seem to be of two minds about Social Security. On one hand, many believe that Social Security is a socialist Ponzi scheme, redistributing wealth from workers to retirees. Nevertheless, the voters also become militant at the very suggestion that benefits might be cut and that they could lose some of their “contributions.”

Even though there is no individual account containing their Social Security savings, American workers have been promised that their taxes will go to fund their retirement. It would be unconscionable for the government to break this promise to those in or near retirement. That is why Republican plans to reform the entitlements would preserve the status quo for retirees and older workers while giving younger workers the option to take part in a plan that has a better chance of being there when they retire.

Trump Administration To Propose Balancing Budget

The complete proposed budget for Donald Trump’s first fiscal year will not be released until next week, but advance word is that the president will propose a plan to balance the federal budget within 10 years. The budget will reportedly ask for cuts in federal entitlement programs in conjunction with an overhaul of the tax and regulatory system.

The Wall Street Journal reports that the plan will not include cuts to the two largest drivers of future spending, Medicare and Social Security, but will ask for trillions of dollars in cuts to discretionary spending such as education, housing, environment programs and foreign aid as well as nondiscretionary spending in programs such as food stamps, Medicaid and federal employee-benefit programs.

The budget will also include budget increases that were announced in the budget blueprint released in March. One of the largest increases in funding would go to the military, which was slated for an additional $54 billion to be split between the Departments of Defense and Homeland Security. There is also likely to be additional infrastructure spending, a neestimatedement for paid parental leave and border security measures.

The Journal notes that the budget does not include the details of the tax reform, but is likely to estimate the Republican tax reform as revenue neutral. Rate cuts would be offset by the elimination of tax breaks so that a Congressional Budget Office estimate would show no loss of revenue.

Balancing the budget will require growth as well as spending cuts. “The way we balanced the budget in the 1990s is we had spending restraint and GDP growth caught up—government revenues caught up, as the GDP growth came in,” Office of Management and Budget Director Mick Mulvaney said. “That’s what we’re trying to get back to.”

White House estimates of growth are much more optimistic than CBO estimates. The White House estimates three percent growth by 2021 while the CBO forecasts a 1.9 percent growth rate. Economists polled by the Journal estimate growth at 2.3 percent if Mr. Trump’s policies are enacted.

Conflicts over the growth rate may make it hard for the Trump Administration to find support among budget hawks for its spending increases. “I am extremely pessimistic that you can show a balanced budget unless you’re going to make the mother of all ‘rosy scenario’ type assumptions,” said William Hoagland, a former Republican budget aide who is now senior vice president at the Bipartisan Policy Center.

The spending cuts are also certain to draw fire from Democrats. Expect much weeping, gnashing of teeth and rending of garments over the proposed slashing of funds for safety net programs. Some moderate Republicans are also likely to object, making it extremely unlikely that the full measure of the cuts will become law.

House Minority Whip Steny Hoyer (D-Md.) said as much on Thursday, claiming, “It is an ideological document, not a document that will ever be utilized.”

The budget is slated to be released next Tuesday, while President Trump is touring Europe and the Middle East. Given Mr. Trump’s problems over the past two weeks, that may increase Republican chances of getting the budget passed.

Budget Hawks To Challenge Trump Spending Plans

 

 

A battle over spending is shaping up between President Trump and congressional Republicans. Many of Trump’s campaign promises involved spending large amounts of tax money on items from the military to infrastructure. Now budget hawks in Congress are gearing up to try to prevent the deficit from exploding over the next four years.

The Wall Street Journal reports that the tensions surfaced in the confirmation hearing of Mick Mulvaney, a South Carolina congressman who has been nominated by Mr. Trump to head the White House Office of Management and Budget. Mulvaney faced sharp questions from two different camps in the GOP. On one side were defense hawks who were concerned about Rep. Mulvaney’s past votes to cut military spending. On the other were those at odds with Mr. Trump’s campaign promise not to cut Social Security or Medicare.

While the Trump Administration has indicated that it plans some cuts in government spending, the elephant in the room is that programs like the National Endowment for the Arts and the Center for Public Broadcasting aren’t what’s busting the federal budget. Even foreign aid only represents about one percent of federal spending.

Let’s face it, America. We have an entitlement problem.

Entitlements make up about half of the federal budget. The largest entitlement of all is a program that many don’t even think of as an entitlement. Social Security accounts for 24 percent of the federal budget and is the largest single budget item. Health spending in the form of Medicare, Medicaid, the Children’s Health Insurance Program (CHIP) and Obamacare subsidies account for another 25 percent. Defense spending is a distant third at 16 percent. Entitlement spending is expected to rise even further as Baby Boomers age and leave the workforce.

“I’m not looking to pick a fight with the president of the United States, but if his goal is to put the country on a fiscally sound course, he’s going to have to address entitlement reform,” Rep. Tom Cole (R., Okla.) told the Journal. “Anybody who is going to balance the budget on discretionary spending [cuts] is on a fool’s errand.”

A fight that is likely to come before entitlement reform is Mr. Trump’s plan for an infrastructure stimulus. Rep. Mulvaney and many Republicans were critical of the infrastructure spending plan before the election, but a separate Journal article noted that Democrats were embracing the $1 trillion proposal.

“We’re challenging him to join us even if his Republican colleagues in the House and Senate aren’t for it,” Sen. Chuck Schumer (D-N.Y.) said. This raises the possibility that President Trump could form a bipartisan alliance with congressional Democrats to enact his spending proposals as well as block conservative attempts at entitlement reform.

The Republican budget hawks will have allies in the Trump Administration. Mr. Mulvaney, a proponent of entitlement reform during his four terms in Congress, said, “I haven’t been quiet and shy since I’ve been here. The president knew what he was getting when he asked me to fill this role.”

Likewise, the fiscally conservative Heritage Foundation was influential in the Trump transition team. Since the group holds President Trump’s ear, reports like the one that advise him to “not be taken in by hyperbolic rhetoric about the state of the nation’s infrastructure or lured by false promises of stimulus-induced job creation” may prove influential in the long term.

The Trump campaign has led to a Trump Administration that is filled with contradictions. Trump’s promises of spending, some made as recently as last week, conflict with his appointment of fiscal conservatives like Mulvaney. Other appointees, such as Steven Mnuchin, seem to be more squishy on deficit spending.

Will Trump follow his advisors or his instincts? Will Republicans back him if Trump follows his liberal inclinations on spending? Stay tuned and find out.

The Decline of Marriage May Be Over

It is still too early to tell, but the decline of marriage may be reversing. New data shows that the number of divorces is falling while the marriage rate has ticked up slightly. Both changes have occurred for several consecutive years.

“The decline [of marriage] has stopped,” Wendy Manning, co-director of the National Center for Family and Marriage Research at Bowling Green State University, told Bloomberg.

The center’s research, based on census data, shows that the number of divorces has fallen for three straight years and is currently at its lowest level in 35 years. Conversely, the marriage rate, which has been declining since the 1970s, seems to have bottomed out and stabilized.

The data is based on the marriage and divorce rates for women aged 15 and older. A comparison chart from the center shows that the divorce rate has hovered around 20 since the 1980s and is currently at a low of 16.9. The marriage rate has continually fallen from a high of 76.9 in 1970 and now stands at 32.3.

There is no definitive answer on what has caused the trends in marriage and divorce to change. A major factor in the falling number of divorces could be that there simply aren’t as many marriages to begin with. Breakups by cohabitating or common law couples would not be reflected in the data.

More Americans are waiting longer to get married as well. ABC News reported in June that the average age at the first marriage had increased by about four years since 1970 for both men and women. Women are an average age of 25.1 and men are 26.8 when they first tie the knot. A few more years of maturity at marriage may contribute to fewer divorces.

“We’ve seen a decline of divorce among people who are younger and an increase among people who are older,” noted Manning.

In fact, the divorce rate might be much lower if Baby Boomers were excluded. Bloomberg previously reported that, while divorce rates were down for younger Americans, they were soaring for Baby Boomers. The high divorce rate among Baby Boomers may have contributed to both the delay in marriage and the lower divorce rate for younger generations by making children of divorce more cautious about getting married in the first place.

Whatever the reason, fewer divorces and more marriages is an encouraging sign and a possible antidote to America’s entitlement crisis. Robert Rector, a senior research fellow at the Heritage Foundation, pointed out that the “principal cause” of child poverty in the United States was “the absence of married fathers in the home.”

Even the liberal Brookings Institution argues that marriage is an important antidote to poverty. Ron Haskins stressed that children who follow three simple rules have only a two percent chance of growing up to live in poverty. Haskins’ advice? “At least finish high school, get a full-time job and wait until age 21 to get married and have children.”

The news of more marriages and fewer divorces is something that Americans on both sides of the political spectrum can and should celebrate. It means that Americans are improving their own lives as well as those of the next generation. It may also provide the means to shrink the welfare state and attack the debt and entitlement crisis. That is a very good thing.