The De Entitling Of America

Is America ready to shake its entitlement addiction? Maybe, maybe not. Speaker of the House gf Representatives Newt Gingrich is betting "yes," and he is quietly preparing a 12-step program to wean the U.S. off the government dole. This year, it's welfare moms, the working poor, and the elderly--mostly Democratic constituencies. But the conservative 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 middle class. Newt would like people to become 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: "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. 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. And will corporate managers, so happy to cut government spending on such programs as Medicare and food stamps, be as willing to see their tax subsidies chopped? Frankly, we doubt it.

Only one thing is certain. The U.S. entitlement society has run up against a wall. What started as temporary 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.

The 1990s are an era of economic anxiety. With America's 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.

Already there is a counterattack building. Recent local elections in Kentucky, Maine, and Virginia showed Democrats holding their own and the Republicans stalling out for the moment. Some independents and suburbanites, who flocked to the GOP in 1994, abandoned it this time around, fleeing the revolutionary rhetoric. Wait until Social Security is threatened. The real fight against de-entitlement will come from the middle class and the business community, not the poor.

We don't expect the New Jeffersonians to win their revolution any time soon because of these political realities, 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. Financial assistance 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. They should be restored. Even if current improvements in productivity get the economy growing at a higher rate, downsizing the government is 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-knit communities and supportive neighbors, well, maybe someday. . . .

Before it's here, it's on the Bloomberg Terminal.