Tuesday, October 23, 2012

The Bonfire of the Entitlements

Never mind about last night's foreign policy debate, the one that wanted to be an economic policy debates.  Never mind about Mitt's Five Point Plan on the economy.  What I want to know is how we can avoid the inevitable bonfire of the entitlements.

Want to know what the gay marriage debate is about?  It's about those spousal Social Security benefits. Want to know what Obamacare is about?  It's about burying fee-for-service Medicare in an administrative quagmire.

In a way, President Obama has a point.  The expansion of Medicare to include drugs was done as a straight increase in benefits without any attempt to finance it with new taxes or any fig leaf of "trust funds."  It's an outrage.  How could President Bush do such a thing.

You can see trajectory of the welfare state's descent into pure power politics by retelling its story.  In the 1930s FDR carefully packaged Social Security as an "earned" benefit: you put your money into the "trust fund" and you take it out when you need it.  In the 1960s LBJ passed Medicare with only a partial attempt to fund it with proper actuarial probity.  So Medicare will eat up its "trust fund" before Social Security.  But in the Medicare Part D expansion, the Republican president and Congress merely passed a new spending entitlement (and also some Republican friendly health spending accounts).  No trust funds, no taxes.

So the ship of state is on course for the rocks.  Inflation, default, haircuts, and riots in the streets.

The problem with the entitlement state is that politics is purely a predatory activity.  You sign up for loot in exchange for your vote.  The administrative state is not a community, it is a patronage state with hungry clients clamoring for their next handout.

Back in the 19th century, before the working class learned from the educated middle class that it could get loot from the state, the ordinary people of the industrial states were busily creating civil-society communities, from churches to fraternal societies, that socialized risk in true community.  You belonged to a mutual-aid society on the understanding that you gave and you received.

The Progressives of 1900 could have built on this model and strengthened it.  But instead they nationalized the mutual-aid movement and converted the communities of self-help into client groups of the political system.  The transaction is no longer that you give to receive, but that you vote to receive.

The choice in 2012 is between a ratification of the universal administrative state -- its Obamacare to universalize healthcare as an administrative structure and its Frank-Dodd to throw the banking industry into the care of the state -- or a half-hearted attempt to rein in the health-care entitlement with a repeal of Obamacare and a reform of Medicare.

Nowhere on the horizon is any suggestion of reforming the entitlement state and returning pensions, healthcare, welfare, and education to civil society where it belongs.  How could there be?  Nobody in America, not one person, is going to agree to cuts in their entitlements until the day after the government runs out of money and the rioters have left the nation in ruins.

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