Tag Archives: Entitlement Spending

Romney acts like an adult

Thomas Edsall, a professor of journalism at Columbia, in a critique of Romney’s campaign strategy, quotes the candidate:

Once we thought ‘entitlement’ meant that Americans were entitled to the privilege of trying to succeed in the greatest country in the world. Americans fought and died to earn and protect that entitlement. But today the new entitlement battle is over the size of the check you get from Washington.

But after reading Edsall’s summary, “The Anti-Entitlement Strategy,” I look upon Romney’s position more favorably. Why? First, I disagree with the very definition of the world entitlement. Second, ponder this little nugget of data from the recent Government Accountability Office’s fiscal 2011 financial statements, as noted by Bryan R. Lawrence, founder of Oakcliff Capital, writing in today’s WaPo:

In fiscal 2011, the cost of the promises grew from $30.9 trillion to $33.8 trillion. To put that in context, consider that the total value of companies traded on U.S. stock markets is $13.1 trillion, based on the Wilshire 5000 index, and the value of the equity in U.S. taxpayers’ homes, according to Freddie Mac, is $6.2 trillion. Said another way, there is not enough wealth in America to meet those promises.

Two points. First, I doubt that Romney would, if able, gut all of the entitlement programs. (He will not be able.) When asked during a debate which federal departments he would abolish, he gave a serious answer – that each department did some things worthwhile, and that we must not throw the baby out with the bath water. Thus, the valuable programs currently performed by a department must first be identified and then assumed by another department, agency or office, before the department could responsibly be abolished. I assume the same sobriety would apply to Romney’s position on entitlement spending.

Second, not all entitlement programs are transfers to “parasitic” “sloths.” He may have to trim down the rhetoric. Even so, he will be the adult in the room when debating Obama, who has responded to both the current depression and the forthcoming entitlement-fueled default by giving speeches and proposing to tax private jets.

Edsall again:

Romney’s adoption of an anti-entitlement strategy comes at a time when he appears to be looking up from the primaries toward Election Day, which suggests that his hard-line stance will be central to his campaign against Obama and not just a temporary maneuver.

Let’s hope that this is not only an election strategy, but a blueprint for governance.

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Only a democrat can cut entitlements.

This is indeed groundbreaking.

Retired police and firefighters from Central Falls, R.I., have agreed to sharp pension cuts, a step thought to be unprecedented in municipal bankruptcy and one that could prompt similar attempts by other distressed governments.

If approved by the bankruptcy court, the agreement could be groundbreaking, said Matthew J. McGowan, the lawyer representing the retirees.

“This is the first time there’s been an agreement of the police and firefighters of any city or town to take the cut,” he said, referring to those already retired, who are typically spared when union contracts change. “I’ve told these guys they’re like the canary in the coal mine. I know that there are other places watching this.”

Central Falls is taking the necessary steps to remain solvent under the weight of a far-too-generous pension system. The question is not whether or not Rhode Island values their police and firefighters; they certainly do. It doesn’t address the appropriate size of their forces which is determined by demographics, population density, crime rates, and other factors. What it does address, however, is the question, at what cost? This is the relevant question.

All towns need police and firefighters, but few towns, judging by the number facing severe long-term budget shortfalls, have found the resources necessary to fund their respective pension plans which for years far outpaced inflation as unions demanded, and politicians supplied, free lunch after free lunch. I’ll scratch your back and you scratch mine. (The plans could be described as Greek.)

Time magazine reported earlier this month about Rhode Island pensions in general:

Perhaps they and thousands of other Rhode Island public employees should never have believed in their pensions to begin with. Then it wouldn’t hurt so much when the fantasy finally came to an end–the fantasy of ever more retirees’ living ever longer lives, receiving ever growing checks from a half-empty fund. But it’s hard to fault the workers; denial has been a state-sponsored pastime on the Narragansett for decades.

“This is about math, not politics,” says Gina Raimondo, Rhode Island Treasurer. More specifically, this is about local math, not local politics. The solution for Rhode Island’s woes – theTime article is entitled “The Little State that Could.” – will be found in Rhode Island. The solution for Albany’s woes will be found in Albany. And so it goes. The solution will not be found in Washington, whose focus should and must be on the long-term national debt problem. (More on that in a second.)

So the solution will be local, and may also have to come from the Left. Gina Raimondo is a democrat, and one who volunteered to take the inglorious position of the adult in the room. She did so because the weight of the pension funds was not just unsustainable, it was also punishing. As the pensions grew to assume more and more of the state budget, funding for things such as libraries – which Raimondo, a Rhodes Scholar and Yale Law graduate, credits with her success – were being crowded out.

“I was reading a story about budget cuts in the Providence Journal,” Raimondo recounts. “The story talked about libraries closing and bus service being cut” because of budget gaps widened by pension expenses. “I had an image of a kid like me trying to get into the library and it’s closed. The public bus is how I got to school every day. The public library is where I studied. It’s where my grandfather taught himself English.” You didn’t have to have an Oxford degree to see the connection: unless the pension hole was filled, those services and others would face even deeper cuts. That’s when Raimondo made up her mind to run for state treasurer in 2010.

Could a republican survive making such cuts? Not likely, unless s/he had a clear mandate to do so. Otherwise, a back-scratching democratic politician would promptly arrive to challenge such an injustice. But it is unlikely a republican would be able or willing to challenge a democrat making such cuts. Only Nixon could go to China. Only a democrat can cut entitlements.

An exception to this was democrat Adrian Fenty losing his DC mayoral election to fellow democrat Vincent Gray because Fenty dared to challenge teachers unions and taxi drivers. But DC is often an exception, isn’t it?

“One thing I think we’ve demonstrated in Rhode Island is, we really have a functional state government,” Mr. Orson said. “We are pulling together and making what we believe to be difficult decisions that you don’t see Congress making right now.”

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Romney Offers More Details

Mitt Romney, in a speech before a conservative group here on Friday, offered his most detailed plan yet to cut government spending and lower the federal debt, including an overhaul of Medicare and significant changes to Social Security.

Speaking at theAmericans for Prosperity Foundation’s annual meeting, Mr. Romney said his plan would cap spending at 20 percent of gross domestic product by 2016, and would require $500 billion a year in spending cuts. To accomplish this, Mr. Romney explained, he would eliminate all nonessential government programs, including Amtrak, return federal programs like Medicaid entirely to the states and improve the productivity and efficiency of the federal government. He would also immediately cut all nonsecurity discretionary spending by 5 percent across the board.

Mr. Romney’s proposal for Medicare is similar to the hotly debated plan that Representative Paul Ryan of Wisconsin, the chairman of the House Budget Committee, introduced in April. Mr. Ryan’s plan would replace Medicare and offer payments to older Americans to buy coverage from the private market.

Mr. Romney’s proposal would give beneficiaries the option of enrolling in private health care plans, using what he, like Mr. Ryan, called a “premium support system.” But unlike the Ryan plan, Mr. Romney’s would allow older people to keep traditional Medicare as an option. However, if the existing government program proved more expensive and charged higher premiums, the participants would be responsible for paying the difference.

This is certainly a good start, and appears to be correcting for some of the difficulties Ryan found in proposing his plan.

He presented his plan as offering more choice — though younger Americans would need to be prepared to possibly pay more, for instance, depending on which plan they selected.

“Younger Americans today, when they turn 65, should have a choice between traditional Medicare and other private health care plans that provide at least the same level of benefits,” he said. “Competition will lower costs and increase the quality of health care.”

He concluded, “The future of Medicare should be marked by competition, by choice, and by innovation, rather than by bureaucracy, stagnation and bankruptcy.”

His plans for Social Security did not include any privatization plans, which some of his Republican presidential rivals support. Instead, “for the next generation of retirees, we should slowly raise the retirement age,” he said. “And finally for the next generation of retirees, we should slow the growth of benefits for those that have higher incomes.”

We will have to see how this is scored by the CBO to see if it is sufficient to curb Medicare costs to a less ominous level, but that he’s speaking about it is a good first step. This problem will not age well.

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Romney Hints at Fiscal Plan

Here in New Hampshire, where Romney enjoys a big lead in the polls, he presented his prescription for the country’s growing debt. He said he would cut federal spending by about $500 billion during his first term by eliminating programs and services he doesn’t like (he cited President Obama’s health-care overhaul) and those he does like but doesn’t think the country can afford (he cited Amtrak).

Romney also pledged to turn responsibility for costly entitlement programs like Medicaid over to state governments, to “let states draft programs in a way they think best to care for their own poor.” He plans to reveal more details of his fiscal policy agenda during a speech Friday in Washington.

“There’s some who say when you talk about fiscal responsibility and cutting a program, you’re showing that you’re heartless,” Romney added. “We have to say, ‘No, no, no, you have to understand. We have a moral responsibility not to spend more than we take in.’ . . . It is a moral responsibility to believe in fiscal responsibility. We do and I do.”

I’ll be waiting for the details, specifically, what he plans to do with Medicare.

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