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Nikki Haley: Social Security is ‘the heart of what’s causing government to grow’

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Nikki Haley is in hot water.

The former North Carolina governor and Republican presidential candidate is getting cooked for comments she made some time ago to Neil Cavuto on Fox Business, where she talked tough on Social Security, Medicare and Medicaid spending.

“What they need to be doing is looking at entitlements,” she told Cavuto. “Look at Social Security, look at Medicaid, look at Medicare, look at these things and let’s actually go to the heart of what’s causing government to grow.”

Cue the inevitable reactions.

I’ve reached out to Gov. Haley’s office for comment.

Haley just announced she is running for president. As she comes from the Republican party’s more centrist wing I wonder how far she is going to get. Apparently I’m not alone. Betting at Predictit, a political betting market, gives her an 11% chance of winning the nomination. I’d take the under.

The question of who wants to do what to Social Security, Medicare and Medicaid is urgent. Social Security’s trust fund is predicted to run out of money within a decade. Medicare even sooner

Some Republicans in Congress are talking about using negotiations over the federal debt to cut the growth in federal spending, potentially including entitlements. Some—a few, but some—have talked about cuts to Social Security, Medicare and Medicaid.

(Rick Scott, the conservative Republican senator from Florida, wants to “sunset” these programs, so that they would expire without renewal every five years. This is the same Rick Scott who, when a healthcare executive, presided over the biggest Medicare fraud in history. You can’t make this stuff up.)

As for Haley: She is definitely seen as a moderate, and her comments were pretty vague, even by politicians’ standards. It suggests she either wants to cut entitlements outright, or limit their growth. There is a big difference between the two.

She’s going to come under intense pressure to spell it out.

Her broader comments about the programs aren’t entirely wrong, but it is (naturally) more complicated. Yes, these three programs are a major cause of the growth of government spending. Back in the 1980s under Ronald Reagan, for example, Social Security, Medicare and Medicaid spending in total averaged about 6.5% of gross domestic product. They are now about 10.5%. But a major cause of this is simply that we have many, many more senior citizens who use the program.

According to the U.S. Census, the number of over-65s in America has risen by 50% since 2000. Nearly all of that has taken place just since 2010. The number of “old, old”—those over 80—has risen by 40%.

Social Security is primarily a pension plan. It is no surprise that if the number of retirees goes up dramatically, so does the pension plan’s outlays. But the value of its payments has also risen. Is anyone suggesting cutting that back? 

Medicare is a health plan for the over 65s. Its costs also rise as the number of seniors rises. And then you have to factor in the huge expansion in the number and quality of medical treatments available. Today surgeons and doctors can save people whom a generation ago were simply doomed. But that costs money. 

A large chunk of Medicaid’s budget also goes to senior citizens, and the costs there are rising too. 

Note that Medicaid, not Medicare, will pay for your nursing home if you run out of money.

Middle-class conservatives can criticize the growth of these programs as the growth of “government,” and of course technically they are correct. But these are primarily just insurance programs. If Social Security, Medicare and Medicaid were scrapped tomorrow, all but the very richest among us would suddenly have to set aside tons of money to pay for private sector equivalents. Even if our taxes went down, I’d be very surprised if many of us were better off.

Credit: marketwatch.com

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