A Twilight for Entitlements?

It has often been said that Obama’s greatest shortcoming is his lack of business experience. In addition to the failed multi-billion-dollar rollout of ObamaCare, consider a short list of the president’s other signature miscalculations:

  • Continuing to block construction of the Keystone XL pipeline, thus imperiling our nation’s energy independence and blocking the creation of thousands of new jobs
  • Threatening yet another big tax increase every year, further slowing growth and recovery now and for years to come
  • Increasing the federal minimum wage to over $10 an hour, putting the unemployed, especially minorities, at even greater long-term risk.

As conservative talk-show host Mark Levin recently quipped, “This guy thinks the world began when he was born.” It makes perfect sense, therefore, that Obama continues to tell successful entrepreneurs in the private sector, “You didn’t build that. Somebody else did!” The somebody else Obama’s talking about is, of course, big government bureaucracy.

Obama learned early in his career that quarreling factions are always easier to handle than a community unified around clear principles of liberty and justice. Thus, over the past seven and a half years he has repeatedly incited discord among special interest groups in congress and the nation at large. Whether it’s a woman’s right to abortion, a gay person’s right to marriage, or a pig’s right to fly -- government bureaucracy has become the final arbiter. Maybe the real problem is Obama never learned how to use a right-handed wrench.

Long before Obama’s world began, though, both houses of Congress started breaking up into caucuses that focus on nitpicking over statutory details rather than deciding major policy issues such as the federal budget and national defense. Over time, these caucuses evolved into committees run by entrenched progressives like Nancy Pelosi and Harry Reid who, in turn, rubber-stamped the appointment of unelected and incompetent agency heads like Kathleen Sibelius, John Koskinkinian, Regina McCarthy, John B. King, Jr. and Jeh Charles Johnson. If you don’t know what these people do, you deserve whatever you get. This is the kind of universal ignorance that has allowed elected representatives to relinquish all power to the administrative state.

With the manifest collapse of ObamaCare, it may be tempting to conclude the president himself is about to self-destruct. That would be a big mistake, for Obama is a shrewdly partisan and ruthlessly determined ideologue. Besides, his loyal supporters in the White House and congress, as well as a significant part of the electorate -- the so-called “low-information” voters -- have grown accustomed to being lied to. The only thing we can be sure of in the next six months is more unpleasant surprises.

What, for instance, will happen as our nation again approaches the so-called "debt ceiling"? How much do even the economic experts know about the threat it poses to our nation’s economy? More importantly, what does anybody know about the steps we should take to meet that threat? Today’s behavioral economists have long since forgotten the basic principle even FDR and LBJ understood -- to wit, that the solvency of the public sector is inextricably linked to the success of private sector industry.

Those who followed the proceedings of the annual Wall Street Journal CEO Council held in Washington on November 24, 2013, may have been hoping for some upbeat answers. “But what they heard,” wrote executive business editor John Bussey, “was more stalemate -- on the budget, the debt ceiling, taxes and health insurance, among other things. Democrats and Republicans at the conference once again decried a ‘failure of leadership’ -- by the other guy.”

Maybe the wrong people were invited. Somebody like hedge fund guru Stanley Druckenmiller would have been a better choice. Cited in the Wall Street Journal as “one of the most successful money managers of all time,” Druckenmiller “has been touring college campuses promoting a message of income redistribution you don’t hear out of Washington.” He’s explaining how federal entitlements like Medicare and Social Security are “ripping off” the X, Y and Z generation voters who re-elected Obama in 2012.

Specifically, Druckenmiller tells them “while today's 65-year-olds will receive on average net lifetime benefits of $327,400, children born now will suffer net lifetime losses of $420,600 as they struggle to pay the bills of aging Americans.” With regard to the debt ceiling Obama is determined to ignore, Druckenmiller says, “…by the 2040s the debt itself and its gargantuan interest payments become bigger problems than entitlements.”

Some might say Druckenmiller’s solution sounds like something from the Occupy Wall Street playbook. He wants to “raise tax rates on investors while at the same time cutting the corporate tax rate to zero.”

In talking to his college audiences, though, Druckenmiller asks some questions and gives some answers they’ve probably never heard in the sacred halls of academe: “Who owns corporations? Shareholders. But who makes the decisions at corporations? The guys running the companies do. So if you tax the shareholder at ordinary income [rates] but you tax the economic actors at zero,” he explains, “you get the actual economic actors incented to hire people, to do capital spending. It’s not the coupon clippers that are making those decisions. It’s the people at the operating level.”

When asked what Republican reformers like Paul Ryan should do, Druckenmiller recommends means-testing Social Security and Medicare. In other words, these entitlement benefits would be adjusted to income. Drukenmiller explains by talking about himself. At 60 years old, his personal assets are estimated to be $2.9 billion. So he wonders why, in five years, Uncle Sam will begin sending him a monthly Social Security check for $3,500. “I don’t need it. I don’t want it,” he declares. He also adds, “I didn’t earn it.”

How have Druckenmiller’s college audiences responded? “‘Even at Berkeley,’ he says, ‘they got it. There is tremendous energy in the room and of course they understand it. I’d say it’s a combination of appalled but motivated.  That’s the response I've been getting, and it’s been overwhelming.”

Druckenmiller’s message may be appealing to young college students who ‘get the math’ of his basic argument. Some of them may have even heard (or read) about it before.

As early as February 19, 2013, columnist Yuval Levin wrote in the New York Times: “Both sides [Republican and Democrat] should agree at least to spend less money on the wealthy -- via means testing…. The goal should be to better target public benefits to those who need them.” Levin also suggested that annual cost-of-living adjustments should be means-tested and that “for older people with the greatest lifetime earnings, the eligibility age could gradually rise to 70 from 65.”

Alas, none of this happened in 2013, 2014, 2015 or even (so far) in 2016. Don’t hold your breath -- no matter who gets the golden ring in November. The time for acting on good ideas has long since passed.

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