The Seniors' Entitlement Crunch: the Politics of Social Security and Medicare Reformdownload

Veto Player or Agent of Reform? Congress and the Politics of Social Security and Medicare Kimberly J. Morgan, PhD Dept. of Political Science George Washington University [email protected] Veto Player or Agent of Reform? Congress and the Politics of Social Security and Medicare Kimberly J. Morgan It is widely acknowledged that the Social Security and Medicare program will face significant financial challenges in the years ahead. Observers on the left and the right may disagree on the magnitude of the problem or how to respond to it, but few deny that the aging of the population will increase spending on Medicare and Social Security while decreasing the size of the population that pays taxes to support these entitlements. The result will be strains on the federal budget as the erosion of Social Security surpluses increases the size of the budget deficit and Medicare eats up a higher share of federal spending. How then will we deal with these challenges? Do we have a political system that is capable of responding to these problems? What kinds of reforms are most likely to be achieved? This paper examines these questions through the lens of Congressional politics. The United States is distinctive in the powerful role of Congress in our political system, yet observers have commonly viewed this as a key source of policy-making inertia. The separation of powers between the executive and legislative branches creates numerous obstacles to controversial legislation, while the complex and fragmented decision-making process within the Congress adds additional hurdles. In addition, the permeability of Congress to constituent and interest group influence makes it difficult to push through either significant expansions or reductions in the welfare state. This has led many to predict stasis on federal entitlements, and there is considerable evidence to support this view. Efforts to institute a system of private accounts in the Social Security program have failed, as has the drive to turn Medicare into a system of competing private insurance plans. Bold cuts in both programs have been similarly unsuccessful and generated the predicted political backlashes against their advocates. At the same time, however, there has been some movement in the politics around federal entitlement programs and Congress has played a critical role in this shift. Institutional changes have strengthened and centralized congressional decision-making, particularly in the House, and enabled a more coherent approach towards federal budgeting. At times, this has stiffened the backbone of Congress against powerful health care interests and enabled cuts in spending on Medicare reimbursements. In addition, the role of the congressional party leadership has grown with regard to agenda-setting and legislative development. One consequence has been increasing activism on federal entitlements, as both parties have developed sharply differing views on whether and how to reform these programs, and the party leadership has become more capable at enacting some of these visions. This has made bipartisan collaboration on entitlement policy more difficult, but highly-charged partisan initiatives on entitlements more likely. A key example was the 2003 Medicare Modernization Act, which not only expanded Medicare by adding a prescription drug benefit to it, but also increased the role of private market actors in the program. Although not the full-fledged transformation of Medicare into a competitive, market-based system, it did represent a significant change in the working of the program and was largely a partisan, Republican initiative. 1 In short, the forecast for the future of Medicare and Social Security is not for dramatic reform to take place any time soon, but rather for a series of incremental but potentially important measures to be adopted in the years ahead. The shape of those measures will of course depend on which party has majority control of Congress and the White House, with Democrats attempting to shore up the financial well-being of Social Security and Medicare in their current form, and Republicans seeking to inject competitive market principles in the two programs. If the current trend towards political polarization continues, we can expect continued gridlock around entitlements under conditions of divided control of government, but increased policy activism in the event of unified control, even if congressional majorities are slim. Congress as a Social Policy Actor One of the most distinctive aspects of the American social policy-making process is the dominant role of Congress. Although this may seem an obvious and trivial point to American policy-makers and US-oriented observers, the power of Congress in social policy is cross-nationally unique. In most Western countries, parliaments have become rubber stamps that generally accede to that which is put before them by prime ministers and their governments. In the US, by contrast, the system of checks and balances necessitates an independent and powerful Congress. Committees and individual members of Congress have large staffs and access to research institutions (e.g. GAO, CBO, Congressional Research Service) that provide members with information that they can use not only to scrutinize executive branch activities but also to draft their own legislation. In most other countries, public policies are devised within government ministries of the executive branch. A critical source of congressional influence lies in its power over revenue and spending decisions, implying a particularly active role in redistributive policy. One consequence of having such a powerful Congress is that it serves to impede rapid or dramatic change. The American policy-making process is littered with veto points but many of them lie within the Congress. A bill often needs to survive votes in both House and Senate subcommittees, garner a majority in both the House and Senate (and possibly a supermajority in the Senate), survive a conference committee between the two chambers, and then receive the president’s assent. Further reinforcing the status quo bias of the American system is the fact that Congress is a majoritarian institution that consists of 535 people acutely focused on their own reelection (Arnold 1998). The House is especially sensitive to the electoral consequences of congressional decisions, given that all House seats are up for reelection every two years. Despite the well-known incumbency advantage, stories abound of secure members of Congress going out on a limb and then being promptly removed in the next election (e.g. Ways and Means Chairman Al Ullman’s championing of a Value Added Tax). Members especially worry about decisions that have negative consequences for interest groups or the general public and that can be easily traced back to House or Senate votes (Arnold 1990). An additional factor making change difficult is the fact of interest group pluralism that follows from the American institutional set-up. In many western nations, the creation and management of social programs is achieved through negotiation between a 2 small number of individuals in the executive branch and representatives of affected interests – namely, business and labor, but also health care providers and insurers in the case of health care policy. These “corporatist” negotiations often take place behind closed doors, which both limits the number of interlocutors and offers a relatively insulated space for potentially sensitive decisions to be made. In the US, by contrast, the independent power of Congress and its decentralization offer access points to any interest group with enough money or a loud enough voice to be heard (Wilson 1982). Rather than agglomerate into a small number of organizations that can speak on behalf of entire sectors, the American political system is littered with thousands of interest organizations, and their numbers have exploded over the past decades (Heaney 2004). The interest- group free-for-all that follows makes it especially challenging to negotiate over sensitive issues and spread costs across groups. This makes it not only difficult to create new programs, but once programs are in place they tend to spawn supportive interest organizations, making it hard to make changes or cuts later on. In short, the American system is designed to thwart large-scale change unless there is a wide degree of consensus. Such agreement is particularly difficult to attain in the arena of redistributive policy, which by definition involves taking from some and giving to others and is thus likely to arouse the ire of those who stand to lose more than they might gain. Numerous scholars have argued that this is one reason why the American welfare state is considerably smaller than that of other western nations (Steinmo 1994; Alesina and Glaeser 2005), but it also implies great difficulties in cutting the programs that do manage to make it through the legislative gantlet (Weaver 1986; Pierson 1996). How then does change take place in the American welfare state? One argument holds that change comes about only when some of the veto points in the American system are overcome. The creation of large redistributive programs took place during two “big bangs” of policy innovation in the 1930s and 1960s (Leman 1977). Notably, this was a time of decline in the power of Congress vis-à-vis the executive branch (Sundquist 1981), and policy initiatives in both eras largely emerged out of the executive branch. As Sundquist (1981) has argued, the inability of Congress to plan or act quickly left a void to be filled in a time or crisis – a void that the executive branch amply filled. Even so, the assent of Congress was still needed, and the fact that Democrats controlled the White House and had a large majority in Congress was also essential for both the New Deal and Great Society measures to pass (Marmor 2000). A good deal of social policy-making has occurred outside of these big bangs of innovation, however, and so an excessive focus on these few times of extraordinary activity can be deceptive (Howard 2007).

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