As we near a midterm elections in which the pollsters tell us there is a good chance that Democrats will regain control of both houses of Congress, we might spend a moment to reflect on what more serious, sane representation might look like.
This is being written, please know, as Social Security, Medicare and Medicaid, grew this year by 7 percent, defense by 5 percent, interest on the debt by 11 percent — all exceeding $1.1 trillion. The payroll tax, began at 2 percent and meant to fund such “entitlements,” is now 12.4 percent of wages.
But before we dive into solutions, let us introduce the economist Veronique de Rugy. We have been fans of hers for several decades now — ever since we read her essay in Reason Magazine,“Congress’s Phony Price Tags.” Therein she confirmed what we all had feared about government overruns: They are the feature, not the bug; they are not mere technical errors or honest mistakes, they are driven by deliberate, incentive-driven behavior rather than simple incompetence.
Here is De Rugy’s summary of the now famous 2010 Flyybierg study of 258 public-works projects conducted over a 70-year span:
“Inaccuracies aren’t just errors. They reflect widespread, deliberate lying on the part of public officials. ‘Project promoters routinely ignore, hide, or otherwise leave out important project costs and risks in order to make total costs appear low.’”
De Rugy ties this to budget gimmicks, rosy scenarios, emergency spending loopholes, back-loaded costs and political incentives that reward low-balling to get projects approved, after which overruns and expansions face little real penalty.
Our suspicions confirmed, what do we do about them? De Rugy this week lists three reforms that a future Congress — but not, alas, the one we expect to elect — could at least start us on the right track:
Social Security — Under current law, benefits will be cut by roughly 20 percent when the program’s trust fund runs dry in the early 2030s. Her fix is to Index the retirement age to life expectancy, use an accurate inflation measure for cost-of-living adjustments and move gradually toward a flat universal benefit that protects lower-income retirees while ending Social Security’s de facto welfare for the wealthiest.
Medicare — More than 40 percent of its financing already comes from general revenue rather than from payroll taxes. The solution is to convert the program to premium support, giving beneficiaries a fixed contribution to spend on traditional Medicare or on competing private plans. We should also raise the eligibility age to 67, matching Social Security, and trim subsidies for well-off seniors.
Medicaid — the problem is pricing. And yet competition based on price — the best cost-control tool — has never been seriously tried. Implementing risk-adjusted per-capita caps, through which the federal government would give states a fixed amount per enrollee, would do just that. States would pay for their own inefficiencies or would be able to use every dollar they save by becoming more efficient. The same logic supports returning more welfare programs to states, starting with the federal share of SNAP.
I would only add to that list the need to reform welfare generally, not just as a way of saving money but as a way of reintroducing self-reliance and individual responsibility into a society that sorely needs both.
Whatever, it was nice to take a moment to think about what is possible some day in the future, in case there is a future. — tcl
