Why Entitlements Keep Growing, and Growing, and . . .
Donald Trump’s gleeful deal with the Democrats—ratcheting up the debt ceiling, as well as the ire of the Republican establishment—puts John Cogan’s mind on 1972. Starting in February of that year, the Democratic presidential candidates engaged in a bidding war over Social Security to gain their party’s nomination. Sen. George McGovern kicked off the political auction with a call for a 20% increase in monthly payments. Sen. Edmund Muskie followed suit, as did Rep. Wilbur Mills, chairman of the Ways and Means Committee. Former Vice President Hubert Humphrey, never one to be outdone, offered a succulent 25%.
Mr. Cogan has just written a riveting, massive book, “The High Cost of Good Intentions,” on the history of entitlements in the U.S., and he describes how in 1972 the Senate “attached an across-the-board, permanent increase of 20% in Social Security benefits to a must-pass bill” on the debt ceiling. President Nixon grumbled loudly but signed it into law. In October, a month before his re-election, “Nixon reversed course and availed himself of an opportunity to take credit for the increase,” Mr. Cogan says. “When checks went out to some 28 million recipients, they were accompanied by a letter that said that the increase was ‘signed into law by President Richard Nixon.’ ”
The Nixon episode shows, says Mr. Cogan, that entitlements have been the main cause of America’s rising national debt since the early 1970s. Mr. Trump’s pact with the Democrats is part of a pattern: “The debt ceiling has to be raised this year because elected representatives have again failed to take action to control entitlement spending.”
An economics professor at Stanford and a fellow at the university’s Hoover Institution, Mr. Cogan, 70, is one of those old-fangled American men who are always inclined to play down their achievements. The latest of his is the book that draws us together in conversation. To be published later this month by Stanford University Press, it is a 400-page account of how federal entitlement programs evolved across two centuries “and the common forces that have been at work in causing their expansion.”
Mr. Cogan conceived the book about four years ago when, as part of his research into 19th-century spending patterns, he “saw this remarkable phenomenon of the growth in Civil War pensions. By the 1890s, 30 years after it had ended, pensions from the war accounted for 40% of all federal government spending.” About a million people were getting Civil War pensions, he found, compared with 8,000 in 1873, eight years after the war. Mr. Cogan wondered what caused that “extraordinary growth” and whether it was unique.
When he went back to the stacks to look at pensions from the Revolutionary War, he saw “exactly the same pattern.” It dawned on him, he says, that this matched “the evolutionary pattern of modern entitlements, such as Social Security, Medicare, Medicaid, food stamps.”
As he explains it, entitlement programs typically begin with relatively narrow eligibility requirements. “For the Civil and Revolutionary War pensions,” he says, “original eligibility was limited to soldiers who had been injured in wartime service, or the widows of those killed in battle.” Marching and fighting wasn’t enough; you had to have lost life or limb for your country. But these rules were incrementally relaxed, and by 30 or 40 years after each war, virtually all veterans were covered, “regardless of whether you were disabled or not, and regardless of whether your disability was related to wartime service.”
We’ve seen the same phenomenon in modern entitlements. “When Social Security started, we had about 50% of the workforce covered,” he says. That was 1935. “By the 1950s, coverage was universal. The Social Security disability program was originally limited to those 50 years or older. And you had to be totally disabled—so disabled that you were unable to perform any job in the U.S. economy.” Gradually, Congress eliminated the age requirement. Then lawmakers allowed benefits for temporary disabilities.
“You see the exact same phenomenon in the low-income benefit entitlement programs,” Mr. Cogan says. Medicaid “extends to all individuals who live in poverty, regardless of whether or not they’re receiving cash welfare.” ObamaCare gave federal health-insurance subsidies to households with incomes up to 400% of the poverty line—currently $98,400 for a family of four.
The same forces that were at play in the 19th century are alive and kicking (the economy) today. “It’s step-by-step expansion,” Mr. Cogan says. “Each expansion tends to be permanent. And each expansion then serves as a base upon which Congress considers the next expansions.”
But what fuels this process? Why is it so relentless? Mr. Cogan identifies a form of moral argument as being a key factor. “After an entitlement is created,” he says, “individuals who are just outside the eligibility line start clamoring for assistance on the grounds that they’re no less ‘worthy’ of receiving assistance than the group that is eligible.” In the case of Social Security disability, why should a 49-year-old who was disabled in a car accident receive any less help than a person who’d had an accident at 50?
“The natural human impulse to treat similarly situated individuals equally under the law,” Mr. Cogan argues, inevitably results in “serial, repeated expansions of eligibility.” Congress responded in the 19th and early 20th centuries, when there were large budget surpluses. “But it also responds now, in the 21st century,” when deficits are endemic and the country is $20 trillion in debt.
Can an entitlement expansion, once granted, ever be taken back? Mr. Cogan refuses to say “never,” but says such rescindments “occur under rather extraordinary circumstances.” He offers a remarkable example: “You might ask, ‘Who achieved the largest reduction in any entitlement in the history of the country?’ Well, surprisingly, it was FDR, a person whom we normally associate with launching the modern era of entitlements.”
When Franklin D. Roosevelt took office in 1933, “the budget was in shambles, in deep deficit as a consequence of the Great Depression.” The new president had campaigned on a promise to put Washington’s fiscal house in order, and at the time, veterans’ pensions accounted for 25% of all government spending. “Within seven days in office,” Mr. Cogan says, “FDR asked Congress to repeal the disability entitlements to World War I, Philippine War, and Boxer Rebellion veterans. Congress gave him that authority, and within a year, he’d knocked nearly 400,000 veterans off the pension rolls. By the time we got to World War II, the benefit rolls were a third lower than they were when he took office.”
Who would feature in an Entitlement Reform Hall of Fame? Mr. Cogan’s blue eyes shine contentedly at this question, as he utters the two words he seems to love most: Grover Cleveland. “He was the very first president to take on an entitlement. He objected to the large Civil War program and thought it needed to be reformed.” Cleveland was largely unsuccessful, but was a “remarkably courageous president.” In his time, Congress had started passing private relief bills, giving out individual pensions “on a grand scale. They’d take 100 or 200 of these bills on a Friday afternoon and pass them with a single vote. Incredibly, 55% of all bills introduced in the Senate in its 1885 to 1887 session were such private pension bills.”
The irrepressible Cleveland “started vetoing these private bills right away”—220 of them in his first term—which explains why he still holds the presidential record for most vetoes. Mr. Cogan admires Cleveland particularly because “each of his vetoes contains an explanation of the reason why and the facts of the case. As time went on, he became more exasperated with Congress, and his veto messages more acerbic.” In one veto, involving a widow who’d claimed her husband had died in battle, Cleveland noted that the man had died in 1882 and wrote: “No cause is given for the soldier’s death, but it is not claimed that it resulted from his military service.” A newspaper later reported the soldier had “choked to death on a piece of beef while gorging himself in a drunken spree.”
The FDR of 1933 is also one of Mr. Cogan’s Hall of Famers, as is Ronald Reagan : “There’s no president who has undertaken entitlement reform in as comprehensive a way.” Reagan “fought a very good fight and he slowed the growth of entitlements like no other president ever had.” He achieved significant reductions in 1981 and 1982, and then “battled to preserve those changes through the rest of his two terms. The growth of entitlements during his time in office is the slowest of any modern administration.” Still, this striking accomplishment “ultimately only slowed, and did not reduce, the aggregate financial burden of entitlements.”
Mr. Cogan also gives an honorable mention to Bill Clinton for his welfare-reform plan. Mr. Clinton’s was “a fairly narrow reform compared to the broad swath of entitlements, but history will show that it’s one of the most successful reforms that’s ever been achieved. The reform not only reduced welfare’s burden on taxpayers, it has also benefited the recipients, whom the old unreformed program had been harming.”
I ask Mr. Cogan how America can break the grip of ever-expanding entitlements. He balks at offering a specific policy agenda, insisting, that his book is a work of economic history. But he does identify three necessary political conditions for any entitlement reform. The first is presidential leadership, without which “there has never been a significant reduction in an entitlement.” Veterans benefits in the 1930s would not have been trimmed without the “strong leadership” of FDR. The restraint on growing expenditures in the 1980s wouldn’t have happened “without Reagan’s steadfast commitment to spending control.” And there would have been no welfare reform in 1996 without Mr. Clinton’s push.
Mr. Cogan’s second sine qua non is “a significant agreement among the general public and the elected representatives that there’s a problem.” In Roosevelt’s day, the belief was widespread that the fiscal crisis had to be addressed. Both Reagan and Mr. Clinton enjoyed public support and a workable legislative consensus.
The third condition is the most piquant, especially given the warring nature of American politics today. Any solution to the problem of entitlements, Mr. Cogan says, “has to be bipartisan.” No significant restraint, he believes, can be imposed by one party alone: “It took a bipartisan effort on the part of Congress and presidents to create our entitlements problem. It’ll take bipartisanship to solve the problem.”
Mr. Varadarajan is a research fellow in journalism at Stanford University’s Hoover Institution.
Appeared in the September 9, 2017, print edition as ‘Why Entitlements Keep Growing, and . . ..’