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November 16, 2012

Election Over, Liberals Call for Entitlement Reform

  Forbes.com

Now that the election is over and President Obama can no longer be held accountable by the voters, liberals are claiming the country needs entitlement reform. Well, most liberals.  Senate Majority Leader Harry Reid has yet to be convinced.

To address the "fiscal cliff," both the Washington Post and USA Today propose spending cuts on entitlement programs.

The USA Today editorial headline screams "Cut entitlements to control debt."  "Yes," it continues, "taxes need to go up, and not just for the wealthiest Americans.  And yes, there's room for cuts in the Pentagon and other federal departments.  But changes in these areas, as needed as they may be, would still be overwhelmed by the burst in spending on Social Security and Medicare as the Baby Boom generation retires and lifespans increase."

The Washington Post, working off the same talking points, writes, "Any serious debt-reduction plan has to include revenue and defense cuts.  But no serious one can exclude entitlements."

Entitlement Enlightenment

So, um, if entitlement cuts are such an important part of addressing the fiscal cliff, then why didn't the media demand that Obama discuss entitlements in his campaign?

Oh, I remember.  They were part of the liberal effort to scare seniors into thinking that Mitt Romney and Paul Ryan-who talked about Medicare and Medicaid reform-would be the ones cutting entitlements.

The scare tactics didn't work.  According to the CNN exit poll, Romney-Ryan won a larger share of the senior vote than Obama-Biden won of the women's vote (and yet nary a story about whether Democrats are losing seniors).

But now that Obama is safe, liberals are calling for entitlement cuts, along with tax increases and spending cuts-all part of the "balanced approach" that has become all the rage among Democrats.

If Congress and the president do cut entitlement programs-and especially Social Security and Medicare-you can bet that Republicans will be blamed for it.  Democrats will claim they would have fewer or no entitlement cuts if only Republicans had agreed to much higher taxes on the wealthy.

But Reid is having none of it.  The Washington Times reports, "Senate Majority Leader Harry Reid said Wednesday that he will not allow changes in Social Security to be part of the negotiations to avoid a federal budget fiscal cliff..."  The Times then quotes Reid as saying, "‘Social Security is not part of the problem, That's [sic] one of the myths the Republicans have tried to create," he said.  "Social Security is sound for the next many years.'"  And he claims that Congress has addressed Medicare's problems ... by passing ObamaCare.

Of course, Social Security does have a trust fund with $2.6 trillion in government IOUs.  But since the government has spent the trust fund money, it has to draw from general revenues, or borrow money, to meet those obligations.

While entitlement programs-which include some 80 means-tested welfare programs, plus Medicare and Social Security, and many smaller programs, such as the GI Bill-are begging for reform, Republicans should tread carefully because Democrats will blame any cut, or reduction in the rate of growth, on the GOP.

An Alternative Plan That Works

A better option would be to explain how creating a system of personal accounts would, over time, provide more retirement security and solve the long-term unfunded liability problems facing both Social Security and Medicare.

Liberals complain that approach isn't safe because people will day trade or the stock market will go down.  However, three counties in Texas opted out of Social Security and created personal accounts 30 years ago and those county workers have never lost a dime.

The accounts on average make 5 percent to 6 percent annually.  When the market does well, so do their accounts.  But when the market tanks, as it did during the recent recession-and at the announcement that Obama won reelection-they still made 3.75 percent.  Because those three counties wanted to create a real substitute for Social Security, they also include a death benefit-hundreds of times larger than Social Security's $255 death benefit-and disability insurance.

Those county workers retire with much higher benefits than Social Security and the county faces no long-term unfunded liabilities.  Known as the Alternate Plan, it should be a model for the country, and every person under 30-most of whom do not believe Social Security will still be around when they retire-should demand a similar option.

Time for Real Entitlement Reform

Yes, entitlements must be reformed, but we need to get away from the same old formula of increasing the eligibility age, cutting benefits and raising taxes.  That approach has only exacerbated fiscal problems and postponed the day of reckoning.

Now that the election is over, liberals are ready to discuss the entitlement challenges that they refused to discuss-indeed, openly demagogued-before the election.

The GOP, which has historically supported personal accounts, should make that the centerpiece of its discussions.  Benefit cuts and tax increases are a losing reform; let the Democrats champion them.  Empowering people by letting them keep and save their own money is a winner.


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