Originally published in MarketWatch
By Bobby Jindal
As a lifelong policy wonk, I see a potent criticism that liberals will use to beat up conservatives in the months to come: They will allege that Republicans will harm entitlement programs to give tax breaks to the rich through tax reform.
Stitching together entitlement and tax reform efforts like this creates an insidious narrative. I know from the inside that conservatives are simply not thinking that way. These are two separate issues, and both are longstanding concerns in the Republican party.
Conservatives view tax cuts as a way to stimulate the economy and raise everyone up. That’s why most of these tax cuts are directed at reducing America’s corporate tax rate, which is currently the highest in the world among developed countries. Each dollar of tax cuts creates more than one dollar of private-sector benefit.
And conservatives also see a reform of Medicare, Medicaid and Social Security as a priority as these plans are, by all accounts, not sustainable in their current form. Even if the GOP tax-cut plan wasn’t headed for the president’s desk, entitlements were going to have to be addressed.
We can have a debate on economic theory, but I can tell you where our hearts are: Conservatives want to grow the real-world economy, not the government economy. We view tax cuts as a way to help boost wage growth back to historical norms, thereby reducing the need for government services and spending.
If economic policy were medicine, conservatives see themselves seeking out both prevention and cure, rather than a constant diet of opioids to hold off the pain even though we are actually quite sick.
Tax dollars are real dollars that belong to real people, and the government shouldn’t be collecting as much as they do in the first place. Taxes have drifted too high over the years and government has gotten too big. Federal spending was 21.5% of gross domestic product and entitlement spending alone amounts to 15.5% of GDP, according to Pew Research Center statistics. Entitlement spending was less than 1% during World War II and 10% just 25 years ago.
Reviving the American Dream
The American Dream is about growing up, getting a good job and being able to take care of yourself and your family. It isn’t about growing up and hoping there is a great government program to take care of you.
Wages for middle-class families have been stagnant for several years, while at the same time costs for everything from housing to education to health care have been rising. Most families are treading water, and some are sinking.
We need to swim. Imagine 3% to 4% economic growth. With tax reforms, deregulatory initiatives and adjusting spending, we can get there. We’re going to get back to real wage increases. We’re going to create even better paying jobs. We’re going to create a much stronger private-sector economy that will provide sustainable security and self-sufficiency to Americans.
If I were to offer advice to a family member given this conservative mind-set in Washington today, it would be this: If you earn a wage, don’t look for government entitlement programs. Work hard and press your boss for a raise. The company will be able to afford it. And with a better job market, if you don’t get that raise, you might be able to take your skills down the street for higher pay.
I’m not talking about anyone who is an inch from retirement, already living on Social Security, or disabled. The reforms being proposed by conservatives would reduce growth in spending over the long term, as opposed to the 10-year window normally used in Washington and unlike most previous changes to entitlement programs, which were front-loaded. This is to change the long-term growth trajectory of the programs, which is critically needed for a variety of reasons.
Why we need entitlement reform
For one, we need to keep our promises. People are living longer and the Baby Boomer generation is aging, meaning we are going to have more retirees receiving benefits without enough current workers paying into the system. By some estimates, this means that Social Security won’t be able to keep its promises starting in 2034. Medicare faces the same demographic challenges, plus rising medical costs. It is projected that Medicare won’t be able to meet its obligations by 2029.
Safety net programs were originally intended for those with very low incomes but have been broadened to now serve more and more middle-class Americans, with 70 million Americans receiving food stamps and tens of millions of additional people on Medicaid, beyond the original low-income and disabled targets for those programs.
The true targets of these reforms are younger people who still have time to make changes to ensure these programs survive for themselves and future generations.
I tend to believe that Americans are unselfish, and we certainly wouldn’t want to steal from our children. We cannot bankrupt these programs before our children have a chance to receive their benefits. This reform effort, then, is really about preserving these programs for future generations.
That said, it isn’t fair to make changes to programs that people have paid into for their entire lives and penalize them by taking away their benefits when they really need them. It’s too late for the older generations to adjust their expectations in retirement, so the true targets of these reforms are younger people who still have time to make changes to ensure these programs survive for themselves and future generations.
When it comes to Social Security, conservatives support increasing the returns of current Social Security funds by allowing individuals the option of investing a portion of their funds into the equity market rather than just Treasury securities. This is similar to how most private-sector 401(k) plans work today.
Ultimately, we could also be smarter about how we provide a safety net. Why can’t seniors have more choices in how they receive their Medicare benefits, including more efficient options that would reduce their premiums? The government would still pay the majority of the premiums, plans would have to provide benefits at least as generous as provided today, and seniors could still choose to stay in the government-run fee-for-service program. Seniors would benefit from competition, and taxpayers would also see savings.
Former Clinton administration official Alice Rivlin testified before Congress in 2012that nearly 9 in 10 seniors live in areas where private health plans have costs lower than traditional, fee-for-service Medicare; under a premium support proposal, these seniors could save money by choosing to enroll in a private plan. Likewise, the Congressional Budget Office recently analyzed one premium support proposaland found that it could reduce Medicare spending by $15 billion annually, while also reducing overall out-of pocket spending by beneficiaries by an average of 6%.
A combination of smart tax cuts and entitlement-program reforms will result in a healthier America, with more economic growth that benefits all participants and stronger Social Security and Medicare programs for today’s seniors and their children.
Bobby Jindal, a Republican, was the governor of Louisiana between 2008 and 2016. As secretary of Louisiana’s Department of Health and Hospitals, Jindal turned a bankrupt Medicaid program with a $400 million deficit into one with three years of surpluses totaling $220 million.