Social Security and Medicare are on the ballot

Afew days ago, the Biden administration released its budget proposal for the 2025 fiscal year (which begins in October). Given that Republicans control the House, this budget isn’t going to happen, so it serves mainly as a statement of principles and intent.

But that doesn’t make the budget irrelevant. It clearly signaled Democrats’ vision for the future — in particular, their belief we can preserve the solvency of Social Security and Medicare by raising taxes on high incomes rather than by cutting benefits. And it draws a stark contrast with the vision of former President Donald Trump, who appeared to say during an interview he would seek to cut those programs.

You might be tempted to dismiss Biden’s assurances on safety net programs as boilerplate; don’t Democrats always promise to protect Social Security and Medicare?

But President Joe Biden has staked out a significantly stronger position than that of Barack Obama, who, as president, all too often seemed to be in the intellectual thrall of those I used to call the Very Serious People, opinion leaders who a decade ago dominated inside-the-Beltway discourse and were obsessed with the need for entitlement reform — which effectively meant cuts to Social Security and Medicare. Obama’s 2014 fiscal year budget teased entitlement reform to the point that even John Boehner, then the Republican House speaker, was prompted to say Obama “does deserve some credit for some incremental entitlement reforms that he has outlined in his budget.”

Biden is saying that none of this is necessary. This is a significant move to the left — although it’s also a move to the center, in the sense that voters never agreed with the elite conventional wisdom that benefits must be cut and a majority consistently says the rich don’t pay enough in taxes.

What explains this toughening up of the Democratic position? For one thing, entitlement programs look a lot more fiscally sustainable than they used to.

A decade ago, projections of spending generally assumed that health care costs would continue their historical pattern of rising much faster than gross domestic product, making Medicare and other health programs increasingly unaffordable. In fact, however, Medicare costs, in particular, have been rising much less than expected.

We still have an aging population, which means a rising ratio of retirees receiving benefits to workers paying taxes; the Congressional Budget Office expects combined spending on Social Security and Medicare to rise by about 3 percentage points of GDP over the next 20 years. But this cost rise is moderate enough it could be offset with higher revenues.

At the same time, the Very Serious People have lost much of their influence. Their repeated predictions of fiscal crisis kept not coming true. The inflation surge of 2021-22 temporarily boosted the credibility of critics of government spending, but this credibility evaporated when dire warnings about persistent stagflation proved utterly wrong.