With This Past, What’s The Future Of Small-Government Conservatism?

Via Power Line, I found out that the Heritage Foundation has a lot of graphs showing the general failure of small-government conservatism to limit the growth of government over the past 45 years.  Federal spending has gone up fairly steadily, with a rate increase during the Bush administration and federal spending per household is more than double the 1965 value.  Even though defense-related discretionary spending has jumped since September 11th, it is not really the culprit, as defense spending is about 4% of GDP, significantly lower than the Cold War averages.  In fact, the problem isn’t even discretionary spending, but rather mandatory spending—stuff which is not subject to review or debate.  Mandatory spending—Medicare, Medicaid, and Social Security—has increased more than sevenfold over the past 42 years, growing at a straight line regardless of the President or Congress.

State and local spending has also increased during this time, though not nearly as much.  Meanwhile, federal revenues are less than federal spending, even though it appears that corporate tax cuts have had some effect on increasing federal revenues (though don’t forget that this was also a boom period with regard to easy money).  It’s interesting to note that regardless of the marginal rates, it appears that the revenue from taxes does not fluctuate much, either in terms of income taxes or corporate taxes.

Going through that list of charts is a bit demoralizing:  over the past 45 years, all we’ve been able to do is keep things from getting significantly worse.  And even then, federal outlays have increased faster than the real GDP.  So, what’s next?  The obvious point to strike, it would seem, is at the combination of Social Security, Medicare, and Medicaid.  These three programs have spiraled out of control and are unsustainable.  Projecting out into the future is a fool’s game, so I didn’t want to link to those slides (including the one I just did), but there is a general agreement that Social Security is, in the next 10 years, about to hit the “too big for its britches” point, at which point FICA taxes will be insufficient for paying Social Security claims.  Medicare and Medicaid are also in dangerous situations.  We all know that there is a problem and the serious people know that there’s only one answer that will work.  The problem is that this one answer (fundamentally re-working and possibly eliminating entitlement program spending) directly affects a large number of voters who, either through short-sightedness, misinformation, or time preferences which place no value upon the future after their deaths, block such changes.

This is a good opportunity for small-government conservatives to come up with a plan for action.  Social Security, thanks to President Bush, is not quite the third rail that it used to be, but conservatives need to come up with a good proposal and then get that information out.  It’s not enough to relay talking points like telling people that they’ll keep more of their paychecks (for Social Security); we need real figures, high-quality estimates, and a serious look at the consequences.  People—especially the young—understand that Social Security is rigged to explode, and it’s just a matter of time before they figure out that Medicare will, too.  We see the 16% in taxes for those programs and realize that we’ll never see a penny of that back.  Small-government conservatives have a problem that they are in a unique position to solve, but they have to have a real plan, as Democrats and status quo-supporting interest groups will stand athwart any serious attempt at reform, as they did in 2004.

The big problem, however, is to find a way which minimizes the short-term turnover and does so in a way that people can understand, thereby limiting the potential for demagoguery.  Sure, it’s nice to point out that, had people invested their Social Security and Medicare earnings in relatively secure bonds (to say nothing of index funds), they would have had a significantly larger return than Social Security.  That might even swing some young people who would be on the fence to support reform.  But that does nothing for the people already there or the baby boomers who are about to retire.  This is the tightrope walk that requires serious intellectual thought, followed by serious political application.  We know that the current system will not work, but any workable political alternative needs to find a way to ensure that current recipients do not lose benefits and those nearing retirement do not have major losses.  It would be a dream to eliminate Social Security, Medicare, and Medicaid (replacing them with smaller, means-tested, state-level initiatives in states which decide to do so), but doing so would, by itself, eliminate more than half the federal budget, and that would be a beautiful rollback.

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