Freeman

PERIPATETICS

Budget-Cutting Resistance

JUNE 22, 2011 by SHELDON RICHMAN

So here’s the problem: While polls show that people want the government’s budget deficit and the national debt reduced, they don’t want the biggest spending items cut.

In the April 17 ABC News-Washington Post poll, 59 percent said that the deficit should be reduced through a combination of unspecified spending cuts and tax increases. But 69 percent opposed cutting Medicaid, 78 percent opposed cutting Medicare, and 56 percent opposed cutting the military. Fifty-three percent said they would oppose a plan to reduce the debt significantly by “raising taxes on all Americans by a small percentage and making small reductions in Medicare and Social Security benefits.” Fifty-four percent said Medicare “should remain as it is today.”

In other words, cut spending but stay away from where the money is. Medicare, Medicaid (plus the State Children’s Health Insurance Program), and the military represent nearly 40 percent of the budget. Social Security is about 20 percent more. (Interest on the debt is 4.6 percent.)

In the poll 72 percent supported raising taxes on people making more than $250,000—54 percent “strongly.” There’s far more sympathy for raising taxes than cutting spending—not a good sign for libertarians.

A McClatchy-Marist poll had similar results. It found that a clear majority, 64 percent, thinks the country is “going in the wrong direction.” Of those who identified themselves as conservatives, 78 percent agreed. Moreover, 57 percent of all respondents said reducing the deficit is the priority, with 68 percent of conservatives agreeing. No other objective came close.

I point this out because in the same poll, when asked if Medicare and Medicaid should be cut, 80 percent said no, with 68 percent of conservatives agreeing. How about reducing military spending? Fifty-four percent overall said no, including 72 percent of conservatives. (“Liberals” and moderates approved, 60 and 54 percent, respectively.)

Sixty-nine percent said they were against raising the debt ceiling, right after saying that they would not cut the biggest items in the budget.

I note for the record that of the conservative respondents, 48 percent said they support or “strongly” support the Tea Party, while 44 percent said they do not.

So what does all this mean? It seems to mean that despite the prominence of the Tea Party and despite the fact that the word libertarian is spoken in the news media more than ever before, the prospects for a major reduction in the size of government in the immediate future are dim—this at a time when there is also near-panic about the debt and the deficit. If big cuts aren’t going to happen now, then when?

 

Sources of Resistance

The political system does not reward budget cutters. There is too much to gain politically by purchasing votes through promises of largess, while hiding or deferring the costs, if they can’t be pushed onto to some unpopular group. I don’t think this means Americans are a bunch of self-conscious freeloaders. Rather they likely (and erroneously) see any benefits they collect as a return on their forced tax “investment.” Social Security and Medicare have certainly been misrepresented as such. Why wouldn’t people be upset at the thought of reduced benefits? Even Medicaid, the medical program for low-income people, affects the middle class. Medicare, the medical program for all retirees, does not cover nursing-home care, but Medicaid does—if a person meets the means test. It’s an open secret that if a nursing-home resident has too much money to qualify for Medicaid, the staff will advise the family on what to do to become eligible. This usually involves a lot of gift-giving and other activities to reduce the resident’s assets to the acceptable level.

The upshot is that even middle-class younger people may well oppose cuts in Medicaid if it means they will have to pay directly for nursing-home care for an elderly parent or perhaps have him or her live in their homes. This is part of a more general consideration. Most people already on Social Security and Medicare would understandably oppose cuts in those programs. Less obvious is that their grown children are likely to take the same position, and not just because they expect to be beneficiaries someday. If those programs were to end, or even be cut substantially, the children would have to help pay their parents’ living expenses out of their own pockets. Yes, they pay today through taxes, but there are differences: First they don’t pay 100 percent, since other taxpayers also kick in, and second there’s a bureaucracy between them and their parents. I suspect most people would rather support their parents through the government rather than directly, and most retired people would probably prefer that too. Face-to-face dependence of aging parents on grown children who are trying to raise their own families can be a source of tension if not outright conflict.

 

Intervention Begets Intervention

Government interventions are not isolated phenomena; rather they are part of a political-economic-social-cultural system, with one part often intended to ameliorate the effects of some other part. (Remember Ludwig von Mises’s “critique of interventionism.”) Thus we should not discuss any particular part in a vacuum—not if we want to say something constructive.

For example, it is an eminently libertarian prescription to call for the abolition of Medicare on grounds that transferring wealth by force is immoral. But left at that, the argument will persuade no one and might even discredit the speaker. Why? Because it fails to acknowledge that many current beneficiaries would be left in dire straits if the program suddenly ended. Nor would it suffice to say that once the program was gone, “the free market” would handle things satisfactorily. What free market? American medicine consists of a government-insurance-doctor-hospital protectionist cartel that suppresses competition and innovation in the provision of services through licensing and myriad other interventions. High prices and callous bureaucracies are the rule for many people, and that didn’t begin with Obamacare. Surely libertarians don’t wish to be understood as proposing—in the name of human freedom—that a vulnerable portion of the population be subjected to that gauntlet.

None of this means that these programs are legitimate or should not be abolished. They require force (taxes) and induce dependence on the political class. What I’m suggesting is that libertarians need to bear these considerations in mind when making their case against such government intervention. They need to be cognizant of the wider issues and combine their critique of Medicare with a critique of the entire government-medical-insurance complex.

If we are to expand the sphere of freedom while shrinking the sphere of force, we first need to be understood. We won’t be understood if we are oblivious to people’s concerns and to how they currently see the government’s role, however fallaciously, in addressing those concerns.

ASSOCIATED ISSUE

July/August 2011

ABOUT

SHELDON RICHMAN

Sheldon Richman is the former editor of The Freeman and TheFreemanOnline.org, and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America's Families.

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