Toward the Precipice
From the November 29, 2010, issue of NR.


Federal spending on everything else, from farm subsidies to the National Zoo — that is, everything but national defense and human resources — amounted to relatively little. It averaged about one-fourth of federal outlays in the 1990s, or roughly 5 percent of GDP. In 2009, it accounted for 22.6 percent of all federal outlays, and 5.6 percent of GDP.

The pattern, as I have argued in my recent book Never Enough, is indeed that when the welfare state doesn’t grow because it must, it grows because it can. Throughout the world, left-of-center politicians and intellectuals react to economic downturns by insisting on more government spending to assist the afflicted. When the economy is strong, on the other hand, their dramatically different position is to insist on more government spending to address “unmet social needs.” One needn’t be a cynic to suspect that these leftists have been less than zealous in their efforts to determine the size of a welfare state that’s exactly the size it needs to be, and doesn’t need any expansion.

President Obama and Speaker Boehner will face a set of circumstances that are far more daunting than the ones that confronted President Clinton and Speaker Gingrich. It’s hard to imagine the economy regaining its balance, much less displaying the vigor of the 1990s, before the nation endures several more years of deleveraging. Making impossible a breather from rising entitlement costs like the one the nation enjoyed that decade, the oldest of the 77 million baby boomers started enrolling in Social Security in 2008 and will become eligible for Medicare in 2011. Americans born between 1946 and 1964 will continue swelling the ranks of those programs’ beneficiaries for the next 20 years. Finally, it’s highly doubtful that the world will be, anytime soon, the safe neighborhood some supposed it was between 1989 and 2001. Adjusted for inflation, defense spending was 20 percent higher in 2009 than in 1989. Given the world’s dangers, the architects of a military draw-down like the one in the 1990s would be guilty of gross negligence.

The felicitous coincidence of a surging economy, a respite from growing entitlement payments, and declining military outlays created budget surpluses in the late 1990s that took the nation and its leaders by surprise. One result of the surpluses, recounted by the historian Steven Gillon in his 2008 book The Pact, was that Bill Clinton and Newt Gingrich began laying the groundwork in 1997 for sweeping reforms to Social Security and Medicare. The talks, held in secret to avoid outraging each one’s partisans, progressed far enough to produce a framework before the Monica Lewinsky story broke in January 1998, ending the negotiations before the participants had fashioned a true deal.

Even so, the framework is noteworthy. Gillon reports that President Clinton was prepared to antagonize his liberal base by accepting entitlement-policy changes strikingly similar to the ones advocated today in Rep. Paul Ryan’s “Roadmap.” Social Security’s retirement age would have been raised, and its cost-of-living adjustment lowered; workers would have been given the option to direct some of their payroll taxes into private retirement accounts. Medicare would have been modified into, or at least in the direction of, a defined-contribution program that helped people purchase public or private health insurance. Speaker Gingrich was prepared to antagonize his conservative base by agreeing to postpone consideration of any tax cuts that returned budget surpluses to the people until after the entitlement reforms had been enacted.

It was never certain, or even probable, that these ambitions could have been achieved on Capitol Hill by what Gillon called a “60-percent coalition made up of moderates in both parties.” It’s significant that Erskine Bowles, President Clinton’s chief of staff in 1997 and a key facilitator of the clandestine entitlement-reform talks, is now the co-chairman, with former Republican senator Alan Simpson, of the National Commission on Fiscal Responsibility and Reform. (Most press accounts refer to it, more simply, as the Bowles-Simpson Commission.) In the event, also by no means certain, that the commission can round up 14 votes from its 18 members for a series of recommendations on tax and spending policy, it will issue its report in December.