Commentary: Entitlement Reform: The Bullet Not Bitten

Franklin D. Roosevelt, who promised in 1932 to balance the budget, ran up the national debt to fund the New Deal. Richard M. Nixon, a lifelong anticommunist, opened U.S. relations with China. Now, it's time to see if Bill Clinton, rushing toward reelection as a defender of seniors' benefits, can make his mark in history by reining in runaway spending on entitlements for the elderly.

Failure to act will cost Clinton dearly. Every second-term accomplishment he can hope for--including a balanced budget--will be wiped out by entitlement outlays. By 2020, based on current trends, every tax dollar will flow back out in Social Security checks, Medicare claims, and Medicaid payments to nursing homes. With no reform, entitlements will swamp all other federal functions.

Clinton's response to that threat? Throughout the campaign, he has ducked the problem. While he and Bob Dole have fought over short-term fixes for Medicare, neither has talked about the breakdown in Social Security that looms when baby boomers start retiring in 15 years. Instead, both talk of naming bipartisan commissions to cope with the long-term imbalances in Social Security and Medicare, as if appointed philosopher-kings can somehow take the politics out of such incendiary issues as tax hikes and benefit cuts.

A PLAN, PLEASE. The commission punt won't work for two reasons. First, the political calendar works against Clinton. Even if he names a commission before Inauguration Day, the panel can't possibly report on such a complex matter before late 1997. Coming after the President's short-lived honeymoon--and just as the 1998 midterm campaign gets rolling--that's no time for action. So that leaves 1999. But how much does Clinton want to stake on his clout during his final two years in office?

The second failing of commissions: They don't work without Presidential leadership. The Greenspan Commission, held up as a model for saving Social Security 14 years ago, was deadlocked until President Reagan's aides hammered out a tax-hike and benefit-cut compromise. The solutions under discussion today--more Medicare managed care for seniors and converting part of Social Security to private retirement accounts--are far more contentious. No blue-ribbon panel can settle on a fix until Clinton lays out his own roadmap.

So what should Clinton do? First, tell his own team to stop minimizing the problem. National Economic Council Director Laura D'Andrea Tyson insists that Social Security's long-term gap equals only 2.2% of the wage base on which payroll taxes are levied. "Not large at all," Tyson says. Oh? That's the equivalent of hiking the payroll tax by 9% while cutting benefits by $34 billion a year. Clinton and House Speaker Newt Gingrich (R-Ga.) shut down the federal government twice last winter over a $20 billion-a-year gap between their Medicare plans.

ACTION? The day after the election, Clinton should order his economists to start on a plan to reform the Big Three. A good place to start: the Administration's Advisory Council on Social Security. That panel has three ideas that span the range of options, from investing part of Social Security's current surpluses in government-owned stock accounts to a partial privatization of the system. Clinton doesn't have to endorse those proposals, but he ought to give the council a White House platform to discuss them and start educating the nation on the need for reform. By Inauguration Day, Clinton should have his own Social Security plan ready to announce.

Will he act? Privately, some aides suggest the President may be ready to tackle entitlements. When Clinton is asked about privatizing Social Security, "you'll notice that he doesn't say `No, no, never!"' notes an Administration economist. But Clinton's first priority will be to shore up the Medicare trust fund, set to go broke in 2001. Then, says one aide, "I'd say it's 50-50 that he'll at least try to take up the Social Security problem."

Any gamble is with the nation's future. Clinton should move now--while the solutions are still manageable and his political stock is high--to dam the entitlement flood. Otherwise, his bridge to the 21st Century--not to mention his place in history--will be washed away.

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