The End of the Welfare State

Back in 1996, just before President Bill Clinton signed a welfare reform bill, he declared: “The era of big government is over.”

The other shoe dropped a couple of weeks ago when another chastened Democratic president, Barack Obama, signed a terrible deal to raise the debt ceiling. It will cut government spending by more than $2 trillion without including any of the revenue increases the president had demanded.

FDR. Source: Library of Congress

The deal has caused an outcry from the president’s liberal base, because they know what’s really at stake: the survival of the welfare state that emerged from the New Deal and the Great Society.

How can I say that?  Isn’t federal spending expected to rise by trillions of dollars over the next decade to pay for the growing costs of these very programs? And didn’t the Bush and Obama administrations just extend Medicare to cover prescription drugs and add health care coverage to millions more?

That’s just the point: It’s starting to sink in that we can’t afford even the existing programs.  The total future unfunded obligations of Medicare, Medicaid, Social Security, and other promised federal benefits approach $50 trillion. As baby boomers retire and live decades more, we won’t be able to pay for anything else, and our kids and grandchildren will be stuck with the bill.

Right now the overwhelming majority of Americans support these programs, as do I, and I oppose the kind of radical overhauls proposed by, say, Rep. Paul Ryan (R-Wisc.)

But clearly something has to give. Either contributions need to rise or benefits have to fall (based on income) or both. Maybe doctors and hospitals won’t get paid as much for their services. Maybe 85 year olds with cancer shouldn’t expect taxpayers to pay for hip replacements or new drugs that cost $100,000 a year and extend their lives for six months.

Protesters battle police in Athens over austerity plans. Photo Credit: Flickr Creative Commons, mkhalili

The debt ceiling mess was the beginning of a long, monumental debate we need to have in this country about what size government we want and can afford. Slowly, painfully we will come to a consensus on that. The process may get even uglier in Europe, which has an older, shrinking population and much more generous welfare states.

The president and Congressional Democrats have vowed to defend the core programs of Social Security, Medicare, and Medicaid. But from now on, don’t look for any big, long-term expansions of government. The battle now will be over how much and how quickly the welfare state will shrink, not grow.

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