The GOP Targets Entitlements

House and Senate Republicans are committed to cutting entitlement programs and, in so doing, forcing Donald Trump to renege on a crucial promise to his voters.

Republicans have long coveted deep cuts in federal entitlement programs. Up to now, Democrats have thwarted their attempts to slash America’s social safety net, but that may change in the coming year.

House Speaker Paul Ryan is openly making the case, and he has robust support from the Republican controlled Congress. On Wednesday, Ryan said, “We have a welfare system that’s trapping people in poverty and effectively paying people not to work. We’ve got to work on that.” Ryan added, in an interview on Ross Kaminsky’s radio show, “We’re going to have to get back next year at entitlement reform, which is how you tackle the debt and deficit.”

Not surprisingly, Ryan’s bold pronouncement comes as Republicans in Congress work to reconcile their so-called tax reform legislation. The hastily crafted bill, when enacted, will disproportionately benefit high-income earners and large corporations while adding up to $1.5 trillion to the national debt over the next decade. Their justification is that the measure will increase economic activity, which will add jobs and grow wages. But few economists agree with this misguided premise. In fact, this tax bill is merely a sop to wealthy Republican donors who threatened to cut off their donations to the party unless taxes are cut.

With even larger deficit spending as a result of the tax cuts, Republicans can turn their attention to reducing federal expenditures. The largest drivers of federal spending are Social Security, Medicare, Medicaid, military spending and interest on the debt. Defense and interest payments will not be cut. That pretty much leaves the entitlement programs.

“Starving the beast” is a political strategy conservatives developed decades ago for reducing government spending. In 1978, economist and future Fed Chairman Alan Greenspan told a congressional committee, “Let us remember that the basic purpose of any tax cut program in today’s environment is to reduce the momentum of expenditure growth by restraining the amount of revenue available and trust that there is a political limit to deficit spending.”  Liberal economist Paul Krugman later observed, “Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position.  Spending cuts could be sold as a necessity rather than a choice.” Speaker Ryan and Republicans are doing just that.

Once the Republican tax proposal is passed by Congress and signed into law by President Donald Trump, there will be no going back. Most Republicans in Congress have signed on to the Taxpayer Protection Pledge. The pledge, authored by political activist Grover Norquist, states that the signatories will never vote to raise taxes under any circumstances or they will be challenged in their next Republican primary election.

A possible hurdle to entitlement cuts could be President Trump, who as a candidate tweeted in 2015, “I was the first & only potential GOP candidate to state there will be no cuts to Social Security, Medicare & Medicaid.” But the president, who is obsessed with winning political victories, will likely endorse any GOP initiative, proclaiming that proposed changes to entitlements are meant to save the programs.

The federal government and the states currently jointly fund Medicaid.  Medicaid provides health coverage to millions of Americans, including the elderly, low-income adults, children and people with disabilities. Speaker Ryan favors converting Medicaid into a block grant program for states and then capping the grants. But historical data on grants indicates that, over time, this will result in a decline in Medicaid funding. And the nation’s neediest citizens will feel the impact. 

Nonetheless, there is broad support among congressional Republicans and their wealthy donors for reducing the cost of entitlements. Utah Senator Orrin Hatch, who is the Republican Senate Finance Committee Chair, summarized the sentiment of his colleagues last week in a speech on the Senate floor.  “I have a rough time wanting to spend billions and billions and trillions of dollars to help people who won’t help themselves, won’t lift a finger, and expect the federal government to do everything.”

Sadly, the Republican dream of undoing entitlement programs established by President Franklin Roosevelt’s New Deal and President Lyndon Johnson’s Great Society may finally be within their reach.