In using deficit fears to target entitlement programs, Republicans are enacting a time-honored political tradition.
Donald Trump won’t say it, but Republicans in the Senate will: Social Security and Medicare would be on the chopping block in a second Trump term. Pointing to rising deficits, Republican senators have all but promised to gut entitlements if Trump gets four more years.
Sen. John Thune (R-SD), the second-ranking Senate Republican, expressed hope to the New York Times that Trump would be “interested” in reforming Social Security and Medicare. Sen. John Barrasso (R-WY) was even more optimistic. “We’ve brought it up with President Trump, who has talked about it being a second-term project,” Barrasso said. Senate Leader Mitch McConnell (R-KY) has made no secret of wanting to cut Social Security.
In using deficit fears to target entitlement programs, many Republicans are hoping to use Trump’s second term to cut Medicare and Social Security. First, expand deficits through tax cuts, then declare that spending must be slashed. The chief target of these proposed cuts is Social Security, which historians have noted the mainstream Republican party has long sought to diminish, privatize, or both.
“Starve the beast”
Today In: MoneySenate Republicans’ talk of entitlement cuts come in the context of new estimates from the Congressional Budget Office, which predicts the deficit will climb to $1 trillion in 2020. By 2029, the deficit relative to GDP is slated to reach the highest levels since World War II—an unprecedented deficit level for an economic expansion, when deficits tend to shrink.
Since past behavior is a good predictor of future behavior, and many Republicans are signaling they want to, Republicans will likely argue for cuts to Social Security and Medicare when a recession inevitably hits. This can be seen as a reprise of the tactic known as “starve the beast.”
“Starve the beast” is a political two-step that
- first generates deficits through tax cuts and,
- second, points to the alarmingly high deficits to attack government spending and reduce entitlements.
Credited to an unnamed Reagan administration official in 1985 and long associated with Reagan economic guru David Stockman, the notion of “starve the beast” emerged from around the time of Reagan’s 1981 tax cuts, which were not paired with simultaneous spending reductions.
Reagan held that higher deficits would naturally lead to budget reductions: “We can lecture our children about extravagance until we run out of voice and breath. Or we can cure their extravagance by simply reducing their allowance.”
Today, you can see the “starve the beast” tactic clearly in the 2017 tax cuts—the main cause of the projected record deficits—to future spending cuts. Trump’s top economic adviser Larry Kudlow, a veteran of the Reagan administration, has made this argument himself. He explicitly invoked “starve the beast” in a 1996 Wall Street Journal op ed:
“Tax cuts impose a restraint on the size of government. Tax cuts will starve the beast… Specifically, tax cuts provide a policy incentive to search for market solutions to the problems of Social Security, health care, education and the environment.”
It would be no surprise to learn that Kudlow, who now heads Trump’s National Economic Council, is pursuing the same course today.
The quest to privatize Social Security
In his 2016 campaign, Donald Trump said bluntly, “I’m not going to cut Social Security like every other Republican.” Despite reports from fellow Republicans like Thune and Barrasso that Trump may, indeed, be just like every Republican in a second term, some on the right think it’s best that he keep that promise.
Among those urging caution is longtime Republican strategist Grover Norquist, famous for his libertarian credo, “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.” After the 2017 tax bill passed, Norquist cautioned Trump that Social Security and Medicare should be “off the table” in future spending reductions.
But to follow Norquist’s advice would go against the momentum of a conservative movement that has been gaining steam since the 1980s in their quest to cut or privatize Social Security.
Republican opposition to Social Security goes back to the program’s earliest days. In the 1935 vote to create Social Security, just 4% of Democrats voted against the bill, compared to 16% of Republicans. The contemporary Social Security privatization movement originates in the conservative Cato Institute, which in 1980 sponsored a book that advocated for privatization. The book’s author, Peter Ferrarra, went on to serve in the Reagan administration.
Advocates for dismantling Social Security knew they faced an uphill climb. In the 1980s, Cato and the Heritage Foundation published a paper, “Achieving a ‘Leninist’ Strategy,” which promoted “guerrilla warfare against both the current Social Security system and the coalition that supports it” by creating “a focused political coalition” against Social Security advocates.
Cato’s Social Security privatization efforts have long been supported by Cato affiliate José Piñera, a former official under Chilean dictator Augusto Pinochet and the architect of Chile’s pension privatization. Forty years after that policy experiment, massive protests erupted in Chile demanding a better retirement system.
Influenced by Cato and other groups, Republican presidents have repeatedly attempted to cut or privatize Social Security. Reagan’s efforts stalled in the face of public opinion. George W. Bush vowed in his second term to expend political capital on the initiative, aiming to cut benefits by partially privatizing Social Security through the introduction of “voluntary personal retirement accounts.” Although it was his top domestic priority, Bush too fell short.
But this history of failures hasn’t stopped today’s Republicans from pushing Trump to go after Social Security, the linchpin of the U.S. retirement system.
Saving Social Security
Cutting Social Security benefits in the face of severe shortfalls in retirement income would hurt most Americans. As my colleague Tony Webb recently pointedout in an episode of my podcast Reset Retirement, one-third of retirees are dependent on Social Security for 90% or more of their income, and over 60% depend on the program for more than half of their income.
As Social Security expert Nancy Altman recently testified, Social Security is essential to the American retirement system. It is the base on which we all secure our retirement incomes. As Altman pointed out, “Social Security made independent retirement a reality. Prior to its enactment, the verb ‘retire’ did not mean what it means today.”
Preserving and expanding Social Security isn’t just an economic issue—it’s a civil rights issue, as Maya Rockeymoore Cummings and Meizhu Lui have argued. Due to the racial wealth gap, as well as the fact that minority workers have worse jobs and relatively lower employer pension coverage, non-white workers have a unique reliance on their Social Security benefits in retirement.
Given the dimming outlook for many American retirees, we must expand Social Security, not cut or privatize it—no matter what the deficit is. The greatest irony in Republican’s “starve the beast” mentality is that Social Security does not even affect the deficit. So perhaps it’s not really about the deficit after all.
Who’s Afraid of Nancy Pelosi?
What has Pelosi achieved?
First, as House minority leader, she played a crucial role in turning back George W. Bush’s attempt to privatize Social Security.
.. Then she was the key figure, arguably even more crucial than President Barack Obama, in passing the Affordable Care Act, which produced a spectacular fall in the number of uninsured Americans and has proved surprisingly robust even in the face of Trumpian sabotage.
She helped enact financial reform, which has turned out to be more vulnerable to being undermined, but still helped stabilize the economy and protected many Americans from fraud.
Pelosi also helped pass the Obama stimulus plan, which economists overwhelmingly agree mitigated job losses from the financial crisis, as well as playing a role in laying the foundation for a green energy revolution.
.. whenever you hear Republicans claim that Pelosi is some kind of wild-eyed leftist, ask yourself, what’s so radical about protecting retirement income, expanding health care and reining in runaway bankers?
It’s probably also worth noting that Pelosi has been untouched by allegations of personal scandal, which is amazing given the right’s ability to manufacture such allegations out of thin air.
How the Republicans Broke Congress
Republican leaders have been blunt about their motivation: to deliver on their promises to wealthy donors, and down the road, to use the leverage of huge deficits to cut and privatize Medicare and Social Security.
.. the unexpected and rapid nature of the decline in American national politics, and how one-sided its cause.
.. the Republican Party — as an institution, as a movement, as a collection of politicians — that has done unique, extensive and possibly irreparable damage to the American political system.
Even today, many people like to imagine that the damage has all been President Trump’s doing — that he took the Republican Party hostage. But the problem goes much deeper.
.. we can’t help seeing the Republican Party as the root cause of today’s political instability. Three major developments in the party required us to change our view.
.. First, beginning in the 1990s, the Republicans strategically demonized Congress and government more broadly and flouted the norms of lawmaking, fueling a significant decline of trust in government
.. House Republicans showed their colors when they first blocked passage of the Troubled Asset Relief Plan, despite the urgent pleas of their own president, George W. Bush, and the speaker of the House, John Boehner. The seeds of a (largely phony) populist reaction were planted.
.. Second, there was the “Obama effect.”
.. we saw a deliberate Republican strategy to oppose all of his initiatives and frame his attempts to compromise as weak or inauthentic. The Senate under the majority leader Mitch McConnell weaponized the filibuster to obstruct legislation, block judges and upend the policy process. The Obama effect had an ominous twist, an undercurrent of racism that was itself embodied in the “birther” movement led by Donald Trump.
.. repeatedly promised the impossible under divided party government: that if they won, Mr. Obama would be forced to his knees, his policies obliterated and government as we knew it demolished. Their subsequent failures to do so spurred even more rage
.. Third, we have seen the impact of significant changes in the news media, which had a far greater importance on the right than on the left. The development of the modern conservative media echo chamber began with the rise of Rush Limbaugh and talk radio in the late 1980s and ramped up with the birth of Fox News. Matt Drudge, his protégé Andrew Breitbart and Breitbart’s successor Steve Bannon leveraged the power of the internet to espouse their far-right views. And with the advent of social media, we saw the emergence of a radical “alt-right” media ecosystem able to create its own “facts” and build an audience around hostility to the establishment, anti-immigration sentiment and racial resentment. Nothing even close to comparable exists on the left.
Mr. Trump’s election and behavior during his first 10 months in office represent not a break with the past but an extreme acceleration of a process that was long underway in conservative politics.
.. The Republican Party is now rationalizing and enabling Mr. Trump’s autocratic, kleptocratic, dangerous and downright embarrassing behavior in
.. hopes of salvaging key elements of its ideological agenda: cutting taxes for the wealthy (as part of possibly the worst tax bill in American history), hobbling the regulatory regime, gutting core government functions and repealing Obamacare without any reasonable plan to replace it.
.. The failure of Republican members of Congress to resist the anti-democratic behavior of President Trump — including holding not a single hearing on his and his team’s kleptocracy
.. Only conservative intellectuals have acknowledged the bankruptcy of the Republican Party.
Modern Economists: The Inept Firefighters’ Club
The problem is with the behavior and the incentive structure of the practitioners. There is overwhelming pressure to produce work that supports the status quo (i.e. redistributing to the rich), that doesn’t question authority, and that is needlessly complex. The result is a discipline in which much of the work is of little use, except to legitimate the existing power structure.
.. When I tried to raise these issues in years prior to the crash, my arguments were largely laughed off by a wide range of economists. I didn’t have the stature, and besides, the argument was far too simple.
.. I pointed out that his Administration’s assumed rates of return in the stock market were impossible given the current price-to-earnings (P/E) ratios in the market and the economic growth rates assumed by the Social Security trustees. This was an argument based on simple algebra.
.. it was necessary to have something more complex than simple algebra to be taken seriously at Brookings.
.. And how about a little accountability for economists when they mess up? There is a large literature on the importance of being able to dismiss workers who do not perform their jobs well. We all know and expect that a dishwasher who keeps breaking the dishes or a custodian who can’t clean the toilets loses his job.
.. I have suggested that economists who prescribe policies that turn out badly, or who can’t see multi-trillion dollar housing bubbles coming whose collapse sinks the economy, ought to pay a price in terms of their careers. Invariably people think I am joking. When they realize I am serious, they think I am crazy or vindictive.