In the classic Hans Christian Andersen fable “The Emperor’s New Clothes,” a beloved but inept emperor is convinced to wear “special” clothes that are invisible. Neither the emperor nor his subjects will admit to not seeing the clothes. Finally, a young boy blurts out the unspeakable truth that the emperor is naked.
Historians may remember Romney’s candid “47 per cent” comments as the unspeakable “emperor’s new clothes” moment that forced a long-overdue discussion of the nakedness of our entitlement funding.
Romney has since taken back what he said, calling his comments “completely wrong.” That’s probably the best political move, but I’m not running for president so I can afford to be nonpolitical.
I am of a different mind: Romney’s leaked comments put a spotlight on America’s least discussed but biggest problem: the rapid and unsustainable growth in entitlement spending. Indeed, most of the so-called “entitled,” such as veterans and the disabled, deserve or need these government benefits. But we need to have a national discussion on how to cut entitlement costs before they bankrupt us. Romney’s comments may not only force us to have that discussion, but also force us to examine how we veered from our parents’ ethic of frugality, hard work and self-reliance to an entitlement system that grants largesse more broadly and often undeservedly.
Medicare is the fastest-growing entitlement. Today’s Medicare system is designed to enrich hospitals and doctors by encouraging them to provide the widest possible array of testing and choose the most expensive drugs. The U.S. pays the most for drugs of any country and allows drug companies to give cash payments to doctors if they use costly drugs. The “47 per cent” should include doctors who derive huge income by using the most expensive drugs possible and reaping hundreds of thousands of dollars each year in extra Medicare payments and drug company rewards as a result. We can cut Medicare spending by changing these dynamics. We can also cut Medicare spending by giving patients incentives to stay healthy, compare costs and be better consumers of health care.
Social Security Disability Insurance (SSDI) is another rapidly growing entitlement program. More than 1.5 million new recipients have been added to it in the last three years. In 2011, SSDI payments totaled $129 billion. Several times a week, my wife, who’s a doctor, sees patients who insist that she certify them as disabled. While she almost always refuses, they often try with the next doctor. Simply updating the system, disqualifying Americans who can work in other jobs and requiring periodic evaluation of a person’s eligibility would substantially cut spending on SSDI.
There are other obvious but easily politicized fixes to stabilise entitlement spending. Raising the Social Security retirement age, means-testing Social Security payments and requiring the use of generic drugs are necessary, obvious and doable.
Our entitlement system is broken and needs to be changed. At the same time, we must recognise that it exists to help Americans who are truly needy. No American should be cold, hungry or lack for medical attention. Our challenge is to separate the needy from the freeloaders. Sadly, President Obama and politicians on both sides of the aisle have politicized every effort to discuss solutions to the rapid growth of entitlement spending. Indeed, President Obama has greatly increased entitlement spending. He has doubled the funding for Pell Grants and expanded the number of recipients by 50 per cent; welfare spending now costs almost $1 trillion annually; and Obamacare would subsidise health care coverage for 30 million Americans.
Yes, Romney could have used better language, but his fundamental point — that far too many Americans are dependent on government assistance — is true. Until and unless we recognise that our emperor and his party are increasing entitlement spending at an unsustainable rate, we are doomed to spiral downward to financial collapse.
Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times bestselling book, “The Comeback: How Innovation Will Restore the American Dream.” Connect with him on Twitter: @GaryShapiro.
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