One of my long time analytical axioms is that only Republicans can fix our health care system, and only Democrats can fix runaway entitlements. This is a variation of the point I have argued before on Power Line—last year here, and again here—that large changes in social policy can only proceed with the consent—not necessarily the agreement, but the consent—of the minority party. That’s why virtually all milestone social legislation for most of the last century passed on a bipartisan basis (actually the 1964 Civil Rights Act attracted a higher proportion of Republican votes than Democrats votes in both houses). Thus, Obama’s biggest mistake with Obamacare was ramming it through on a purely partisan basis (ditto the stimulus), while dismissing alternatives that might have attracted some Republican votes, like malpractice liability reform and cross-state insurance competition. (Actually I don’t think Obama was the least bit troubled by this, but that’s a topic for another day.)
Much as I am a fanboy of Paul Ryan and his fiscal reform plans, Republicans probably can’t enact significant entitlement reform on a partisan basis, even if they win a landslide election in November. Some Democrats need to come to the plate. The track record so far is not encouraging; the manner in which Obama and Democrats brushed aside the Simpson-Bowles commission report two years ago was shameful. Ryan tells me that he’s had a number of Democrats tell him privately that they’re ready to deal—after the election. Real profiles in courage.
This is all prologue to noting the report out this week from Third Way, a centrist-Democrat Clinton/Blair style think tank, entitled “Collision Course: Why Democrats Must Back Entitlement Reform.” (Josh Freed on Third Way’s staff is a pal of mine, so I follow their work more closely than some other outfits.) The Third Way report is concerned with the fact that soaring entitlement spending is crowding out genuine public investment in science, technology, and infrastructure that helps the economy grow. This axis of the argument might be disputed, but at least give Third Way its due for not falling into calling food stamps, unemployment insurance, and Head Start “investments” the way most liberals like to do:
Today, there is a $1 trillion gulf between what we are spending on major entitlement programs and the money we devote to public investments. In ten years, the gap will be $2.6 trillion.
In effect, while investments were once one of the largest parts of our budget, today they are one of the smallest. In fact, public investments represented a full one-third of the budget in the 1960s. Today they have dwindled to less than 15% as a result of more and more federal dollars going to entitlements. And as the budget caps set forth in the Budget Control Act take effect, investment spending will fall below the rate of inflation, plummeting to 5% of our budget by 2040. This fiscal path translates to a less-skilled workforce, lower rates of job creation, and an infrastructure unfit for a 21st century economy—hardly the Great Society LBJ envisioned.
The Third Way report doesn’t say exactly how entitlement spending should be fixed. But it does offer this debunking of favorite liberal answers:
So how do we ensure that a robust investment budget continues to fuel middle class growth? Revenue can and should be part of a solution. But because entitlements are growing faster than earnings, it’s simply not enough. Even if in 2014, we increased revenue to 21% of GDP—the highest it’s been since the creation of the modern tax code—by 2040, we would still face an annual deficit of more than $4 trillion in 2012 dollars.
Cutting defense spending is also not the silver bullet that many progressives like to believe it is. Even before sequestration, its share of the budget has been close to flat for 20 years. With sequestration, discretionary defense spending will continue to decline, dipping to less than 14% of outlays by 2022.
Will this report make any difference? Hard to tell. Third Way is hardly a bipartisan organization—its honorary co-chairs and board are mostly moderate liberal Democrats, the kind who once were the pillars of the Democratic Leadership Council, which Third Way seems to have replaced in many ways. Of course, the Democratic left declared war on the DLC during and after the Clinton years, which is one reason why it is a shell of its old self. The DLC still exists, but hardly seems the force it once was. Will any office-holding Democrats embrace the Third Way report? I’ll be watching.