Beyond the Fiscal Cliff: Entitlement Reform

One of the major issues not addressed as part of the recent deal on the fiscal cliff is the future of the major entitlement programs – Social Security, Medicare and Medicaid.

Entitlements are programs that pay benefits to anyone who applies for them and meets the eligibility requirements for that specific program. Social Security and Medicare – the two largest entitlement programs – together account for roughly one third of total federal spending.

Many analysts, along with congressional Republicans, consider these programs to be the main contributors to our growing federal debt. Senate Minority Leader Mitch McConnell (R-KY), who led GOP negotiators during the fiscal cliff discussions, stated repeatedly during the negotiations that Republicans would “be open to new revenue in exchange for meaningful reforms to the entitlement programs that are the primary drivers of our debt.”

That the fiscal cliff deal was reached without addressing the issue of entitlement programs is just another indication that this will be a hot topic as the new Congress ramps up its work. Entitlement reform has long been a high priority for congressional Republicans, who view it as essential to ensuring the long term financial viability of the programs as healthcare costs continue to grow and baby boomers begin retiring and start to draw benefits.

Yet many Democrats in Congress – who consider protecting Social Security and Medicare as central components of their party’s platform – view GOP reform efforts as a way to reduce program benefits. They look at proposals such as those made by House Budget Committee Chair Paul Ryan (R-WI) which would effectively privatize Medicare and turn Medicaid into a block grant program as ways to cut back on these programs while shifting additional costs to beneficiaries.

Although President Obama resisted such efforts during the fiscal cliff negotiations, he has at times indicated his willingness to discuss changes in major entitlement programs. That fact, coupled with a real desire among Republicans in Congress to take on entitlement reform, and the “hands off” approach of most Democrats ensures that this will be a hot topic of debate in Washington.

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