THE DE-ENTITLING OF AMERICA
Is America ready to shake its entitlement addiction? Maybe, maybe not. Newt Gingrich is betting "yes," and he is quietly preparing a 12-step program to wean the country off the government dole. This year, it's welfare moms, the working poor, and the elderly--mostly Democratic constituencies. But the GOP agenda goes way beyond what most Americans imagine. The next step calls for ending corporate welfare and going after conservative Republican supporters--companies, exporters, farmers, ranchers, small-business owners. After that, the target is the entire middle class. Newt would like you to become more self-reliant and say goodbye to subsidized college loans, mortgage deductions, and even Social Security. Whether it's tax dollars or tax breaks, the Newtonian agenda is clear: "De-entitle" the entitlement state and rewrite the social contract between citizens and the federal government.
But do most Americans really understand this agenda and are they willing to ax their own entitlements? We don't think so. Do they have the grit to return to a 19th century society where local neighbors and churches, and not government, provide social safety nets? We're not betting on it. Will country clubbers be as eager to lose their municipal-bond tax break (which is, after all, an entitlement) as they are to cut the earned income tax credit for the working poor? We're not counting on it. Will corporate managers, so happy to cut government spending on Medicare and food stamps, be as willing to see their tax subsidies chopped? Frankly, we doubt it. Just take a look at the current negotiations over the tax bill in Congress, where an army of special interests writes government favors for themselves. Rich and poor, business and labor are all still hooked on entitlements.
WASTE AND CORRUPTION
Only one thing is certain. The U.S. entitlement society has run up against a wall. What started as temporary federal assistance to tide some people over in bad times has turned into permanent commitments to vast numbers of people with open-ended, automatic, legal entitlements to government largesse. Waste, bloat, and corruption have destroyed the financial underpinnings of this way of life. Entitlements account for 61% of the federal budget today and will rise to 80% by 2005. It can't go on.
Those seeking a return to the Jeffersonian future are perforce required to show where the resources will come from to reweave a security net at the community level. We see no evidence of their having done so. Already private charities are up in arms at the prospect of losing their massive federal funding. How can they shoulder greater responsibilities with fewer resources? Public policy must be changed to encourage private giving. That's the easy part. How are families supposed to accept greater burdens without greater financial resources? More, much more than a $500 per child tax credit, must be left on the kitchen table for the Jeffersonian dream to come true. Then there is the matter of the social role of corporations. Right now, many pretend they have none. But there can be no successful de-entitlement without companies training and hiring needy Americans at the local level, rather than chasing the cheapest labor around the world. De-entitlement is further jeopardized without significant improvements in real wages. The benefits of higher productivity will have to spread to employees as well as shareholders. Will companies share the wealth and make de-entitlement possible? We'll see.
It's all too easy to romanticize the frontier society of the 19th century. In fact, it's easy to forget that children still died of starvation and disease, states fought a horrendous war against one another, robber barons monopolized much of the economy, and severe recessions struck with regularity. Sometimes neighborhood institutions helped the sick and the weak. Sometimes they didn't.
The 1990s are an era of economic anxiety. With the middle class so worried about losing jobs and downward mobility, de-entitling will meet resistance. The latest BUSINESS WEEK/Harris poll shows that the vast majority of people still think the federal government should guarantee a job to any American willing to work, a minimum of health care, nursing home care for the elderly, public assistance for those who cannot work, job training, and more (page 120).
Already there is a counterattack building. The off-year local elections in Kentucky, Maine, and Virginia (states that receive large amounts of federal money) showed Democrats holding their own. The GOP political momentum, sweeping the nation since 1994, has stalled out for the moment. Some independents and suburbanites who flocked to the GOP abandoned it this time around, fleeing the revolutionary rhetoric. This may be just the beginning. Wait until Social Security is threatened, the home mortgage deduction goes, or depreciation allowances end. The real fight against de-entitlement will come from the middle class and business, not the poor.
Because of these political realities, we don't expect the New Jeffersonians to win their revolution any time soon. But even if they don't, they will have succeeded in shrinking the entitlement society as we know it. A return to tough love is good for America. Help should be there, whether on the national or local level, but it should be temporary in nature and limited in scope. Personal responsibility, family obligation, and corporate social concern have all eroded in recent decades, and they should be restored. Even if current improvements in productivity get the economy growing at a higher rate and provide new revenue, restructuring and downsizing the government are now inevitable. Efficient delivery is the sine qua non of any government service from this time forward. As for the rest of the Jeffersonian dream, of close communities and supportive neighbors, well, maybe someday....