If there is one area where Sen. John McCain of Arizona can credibly claim to be more conservative than most Senate Republicans, it is on the issue of controlling spending.
McCain cemented his credentials in this area in 2003, when he was one of only nine Senate Republicans to vote against President Bush’s Medicare prescription drug entitlement.
For this reason, I was especially interested in reading McCain’s April 16 speech to The Economic Club of Memphis, which was supposed to explain the economic policies he would pursue as president. What would McCain say about spending? Would he only attack "pork-barrel spending," which is a sliver of federal expenditures? Or would he go after big-ticket entitlements?
At first, McCain did not disappoint. "No problem is in more need of honesty than the looming insolvency of our entitlements programs," said McCain. "No government program is the object of more political posturing and spin than Social Security and Medicare. Americans have the right to know the truth, no matter how bad it is. So here’s a little straight talk: The current Social Security system is unsustainable. Period."
McCain’s bleak assessment is backed by the analysis of the Government Accountability Office. "Absent changes in the structure of Social Security and Medicare, sometime during the 2040s government would do nothing but pay interest on the debt and mail checks to retirees," the GAO concluded in a report published last month.
Even were the growth in federal discretionary spending limited to the rate of growth in the economy, the GAO estimates, the boom in entitlement spending would still drive overall federal spending to about 40 %of GDP by 2040. To put that in perspective, federal spending was 20.2 %of GDP in 2006, and federal revenues were 18.4 %.
In other words, federal spending — driven by entitlements — is on a trajectory to double as a percentage of GDP by the time a baby born this year is 33 years old. To balance the budget, federal taxes would also need to suck up 40 % of GDP. State and local taxes, of course, would inhale an additional share.
In that America, there would be two broad classes of people, both essentially enslaved to government: Elderly people dependent on government for their income (Social Security) and health care (Medicare), and younger people paying the confiscatory taxes needed to support these programs.
America would be a socialist state where government either took most of your income or provided most of your income.
So, what solution is candidate McCain offering? He is not saying.
"If I’m president, I’ll submit a plan to save Social Security and Medicare, and I’ll ask Democrats in Congress to do the same," McCain said in Memphis. "We’ll listen to what people outside government suggest, as well. I’ll work on a bipartisan basis to make the hard choices; to protect the retirement security of the American worker and the growth of the American economy."
But no matter what McCain’s secret plan to save Social Security and Medicare turns out to be, it will not fly politically. Unless a president is elected with a mandate for specific Social Security and Medicare reforms, he will not get a majority in Congress to vote for those reforms.
President Bush learned this the hard way after the 2004 election. Having not campaigned on Social Security reform, he tried to retroactively create a mandate for it. He toured the country giving Social Security speeches and pre-emptively offered concessions to Democrats. He got nowhere.
The shame of it was that the ideal Social Security reform bill had already been written. Its co-authors are Republican Rep. Paul Ryan of Wisconsin and Republican Sen. John Sununu of New Hampshire. It would allow a worker to put 6.4 points of the 12.4 percent he and his employer pay in Social Security taxes into a personal retirement account.
At retirement age, the worker would be required to use money from this account to purchase an annuity that would pay him the equivalent of the Social Security benefit to which he would otherwise be entitled. If the worker’s account did not have enough money to pay for the annuity, the government would make up the difference. If it had more than enough, the worker would keep the difference.
In the America this reform would create, the elderly would not be dependent on government and young workers would not be taxed into penury.
Moreover, Social Security’s chief actuary determined that the Ryan-Sununu plan would make Social Security solvent.
McCain or any other presidential candidate who prominently embraced this kind of reform would incite a debate he could win — before the election — which is the only way he could win the debate after the election.
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