Social contract between generations needs updating

WASHINGTON — The trustees for Social Security and Medicare issued their annual reports last week. This is cause for discouragement because it reminds us how much we’ve mortgaged the country’s future to spending for older Americans.

Already, Social Security and Medicare constituted 42 percent of federal spending in 2017, say the trustees. If they had included Medicaid, the share would have exceeded 50 percent. As more baby boomers retire, these amounts will grow. (Medicare covers much health spending for the 65-and-over population; Medicaid spending is dominated by long-term care for the poor elderly and disabled.)

With interest payments on the national debt at almost 7 percent of spending in 2017 — and projected by the Congressional Budget Office to hit 13 percent in 2028 — there isn’t much room for anything else.

Precisely. Here’s the conclusion of a new study by Eugene Steuerle and Caleb Quakenbush of the Urban Institute, a think tank:

“We project that over the coming decade, nearly all growth in [federal] spending will go towards higher health [care], Social Security, and interest costs — with little left for almost everything else: infrastructure, research, education, defense, housing, and most basic government functions.”

From 2017 to 2028, they estimate that Social Security spending, after inflation, will grow 3.8 percent a year and Medicare 4.9 percent. Meanwhile, defense spending increases only 0.3 percent a year and most other spending — food stamps, highways, federal courts — rises a mere 0.7 percent annually.

None of this is a secret. Indeed, I have written columns like this for more than 30 years — and that’s why it’s so discouraging.

Many public policy problems are genuinely hard to solve. Some are surprises. We are caught unawares. Say, 9/11. Other social problems are so complex that, even with the best of political will, it’s hard to make progress. Say, improving schools.

But an aging population doesn’t fit this formula. The problem is clear; solutions are at hand.

We have known for decades that Americans 65 and older would increase from 12 percent of the population in 1990 to about 15 percent now and 20 percent in the late 2020s. That’s no surprise. Similarly, we have known that health costs are rising faster than national income, even as the health status and life expectancies of older people improved. Finally, we have known that many elderly households have sizable retirement savings.

We need to rewrite the social contract between generations to reflect these changed conditions — longer life expectancies and greater private wealth. Eligibility ages need to be raised; benefits for wealthier recipients need to be trimmed. At age 65, typical Americans live another two decades. We simply cannot afford to subsidize a fifth of the population for another 20 years or so.

Instead, politicians freeze at the mere mention of cuts in Social Security and Medicare. (Cuts in Medicare are usually imposed on “providers” — hospitals and doctors.) These’ programs are sacrosanct. Do not touch.

There are three common explanations for this: (1) People sympathize with the elderly, who are usually someone’s parents or grandparents; (2) Recipients have been “promised” their benefits; and (3) The elderly — and their lobbies — will retaliate at the ballot box against politicians who threaten their benefits.

Democrats bear a disproportionate responsibility for the stalemate, because Social Security and Medicare are their signature programs. For decades, liberals have accused anyone who suggests benefit reductions as being cruel, uncaring and immoral. Naturally, Republicans find debate on these terms unattractive and have increasingly abstained. The result has been to make political cowardice intellectually respectable.

The irony is that the pro-government (Democratic) party is, quietly, weakening government by its staunch support of Social Security and Medicare, which systematically squeezes other programs. This also precludes any serious effort to reduce budget deficits. Yes, taxes will have to go up; but some spending will have to go down, and this is virtually impossible if Medicare and Social Security are excluded from cuts.

The trustees’ reports don’t help us much, because they focus on the minutiae of various trust funds rather than fundamental questions about the proper role of government.

Let’s be clear: Even modest reductions in Social Security and Medicare benefits would still leave huge programs and would not eliminate conflicts between generations. But spending cuts would make for a fairer generational balance and would relieve the pressures to cut other programs, including defense.

Once upon a time — most obviously in the buoyant 1990s — it was possible to envision the gradual introduction of benefit cuts that would mute hardship by providing ample warning of impending changes. But that time is long gone. Now the practical possibilities are too few cuts or, less likely, too many.

We are passing along to our children a governmental apparatus that invests heavily in the past and shortchanges the future. Shame on us.

Robert Samuelson is a columnist with The Washington Post.