Fred Hiatt is Holding Head Start Hostage Until Liberals Support Cuts to Social Security and Medicare

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Monday, 17 June 2013 07:04

That is the essence of his column today warning liberals of sharp cuts to domestic discretionary spending (e.g. Head Start, education, infrastructure etc.) unless there are cuts to Medicare and Social Security. Hiatt uses the term "entitlements" since it is less popular than the programs to which it refers.

The basic argument is that Hiatt has decided how large the deficit can be, he has decided that there can be no additional cuts to the military, and that there can be no new taxes ever. Therefore if liberals don't want to see the domestic discretionary portion of the budget contract, then they better accept cuts to Social Security and Medicare.

It's not clear why anyone should accept Hiatt's assessment on any of these points. (He is batting close to 100 percent in the being wrong department. Remember when his gang was warning about budget deficits back in 2006-2007 as the collapse of the housing bubble was about to sink the economy?)

Of course the size of the deficit is not fixed and in the near term larger deficits will foster growth and create jobs. Why should liberals accept that cavemen, who have trouble with math and logic, will forever keep us from getting the economy back to full employment?

As far as the military budget, we were spending 3.0 percent of GDP on the military back in 2000, is there some obvious reason that we can't get back to that level again? Our economy will be more than 50 percent larger in 2020, so 3 percent of 2020 GDP would be 50 percent more spending in real dollars than it was in 2000.

As far as taxes, liberals would obviously prefer progressive tax increases to regressive ones, but polling data consistently show that people across the political spectrum would prefer tax increases to cuts in Social Security and Medicare. In other words, if the budget situation requires that we either make cuts to these programs or raise the taxes needed to pay for them, Democrats, Independents and even Republicans prefer to raise taxes. It is only Washington elite types like Fred Hiatt who want to rule out this option.

Finally, most liberals would be happy to have cuts to Medicare that involve cutting excess payments to providers. We pay more than twice as much per person for our health care as the average for people in other wealthy countries. If we got our costs more in line by cutting payments to drug companies and medical equipment companies, most liberals would be fully on board.

We could also go the route of promoting free trade: allowing Medicare beneficiaries to buy into the more efficient health care systems in other countries and splitting the savings. Unfortunately Hiatt and other Washington elite types become ardent protectionists when the discussion is about trade that could reduce the income of their rich friends.  

So we can see the problem is not inevitable cuts in domestic discretionary spending. The problem is that people like Fred Hiatt want to rule out any other options in order to try to force cuts to Social Security and Medicare.

One final point, there is no guarantee that even if liberals agreed to cut the benefits received by people on Social Security and Medicare that the money would go to domestic discretionary spending. In the past surplus funds have been used for tax cuts targeted to the rich. In the current political environment in Washington it would be absurd to assume that this could not happen again.