How Populism Enables Gerontocracy

The Right will eventually have to get serious about entitlements

Did you know that there are people in Washington who want to cut Social Security and throw our grandparents into poverty so Zelensky’s ministers can buy more yachts? Granted, no politician has ever declared that to be his position, but JD Vance recently assured us that this is the tradeoff the US government is facing.

This comment really got to me, and it has nothing to do with my position on Ukraine or Social Security. I can understand why such a statement can appeal to voters. But the effectiveness of this argument relies on their overwhelming ignorance about the federal budget, and represents the kind of rhetoric that gives populism an advantage in the marketplace of ideas while it leads the country on a downward trajectory.

I personally like JD Vance, and think he genuinely wants to do the right thing for the country. I don’t believe he’s consciously trying to mislead voters.

Nonetheless, aid to Ukraine is a red herring in any debates about the federal budget and our long-term economic prospects. Support to Zelensky’s government has totaled $75 billion since the conflict with Russia started, much of it coming from military stockpiles. Meanwhile, the US spent $1.4 trillion on Social Security in 2021 alone. That number, as Brian Riedl explained when I talked to him about the federal budget, is going to grow rapidly over the coming decades. Health entitlements and social security together are projected to reach over $4 trillion a year in current dollars by 2033.

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What do we do about this? There’s a conventional left-wing position that says raise taxes, and a right-wing position that is in favor of cutting spending. To me, a basic position both sides should agree on is to means test entitlement programs, so that we don’t bankrupt ourselves cutting checks to seniors who don’t need them. Conservatives should get behind this idea because it’s a spending cut, and while liberals may like providing help to the poor, I’ve never seen one argue that government should subsidize the lifestyles of the rich just because they happen to be old.

Besides that, we can have an honest debate about what else to do. Unlike the conservative and liberal positions, the kind of populism that is on the rise within the Republican Party seeks to avoid tough decisions. This is true for leftists more inclined towards economic populism as well, with politicians like Bernie Sanders and Elizabeth Warren wanting people to believe that one can pay for entitlements, and practically everything else, by simply milking the rich. On the right, the prejudice is against foreigners, so we just have to stop letting in illegals and buying yachts for Zelensky. Yet the math doesn’t work. One is going to need some combination of raising revenue and reducing benefits, and such choices are going to hit wide swaths of the population, not just rich people or corrupt Ukrainian politicians. When in power, both sides have been able to get away with not considering any tradeoffs because the budgetary crisis was always further down the line. In the next decade, however, things are going to come to a head, and tough choices will need to be made.

Conservatives and Entitlement Reform

American conservatism over the last three-quarters of a century or so has been based on a belief in small government. Naturally enough, that has meant looking at the places where government spends the most money, and then working from there. Since Social Security and Medicare are the largest parts of the federal budget, conservatives have tended to want to reduce benefits. Moreover, as the chart below shows, once you start projecting into the future, you see this problem is going to get worse over time, making the goal of reining in these programs particularly important.

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The problem is that entitlement reform is extremely unpopular. Even if you tell people it will happen decades down the line and explain to them that current programs are unsustainable, people would rather listen to politicians who tell them that we can continue on the current trajectory and everything will be fine.

Nonetheless, conservatives have occasionally felt compelled to at least try to do something about the coming crisis. After winning reelection in 2004, Bush went on a tour throughout the country trying to sell Americans on the idea that young people should be able to invest some of the money they put into Social Security into private accounts. In the face of opposition from practically all Democrats and many Republicans, he failed. The dream stayed alive though, and entitlement reform was the main goal of Paul Ryan’s career. He reached the top levels of the Republican Party, becoming Mitt Romney’s running mate in 2012 and later Speaker of the House. Within the conservative movement, his views on these issues were overtaken by those of Trump, who even now runs against DeSantis based on the idea that his opponent will cut entitlements, even though the Florida governor himself shies away from talking about the topic.

Populism sees wisdom in the masses, so from its point of view the fact that Trumpism is more popular than Paul Ryanism is enough reason to declare that Trumpism is correct. But obviously, most Americans never look at a government budget, and telling them they can have everything they want will always be more popular than getting them to think in terms of tradeoffs. Countries like Argentina and most of Western Europe have stagnated for this reason and the goal of the American conservative movement should be to make sure that doesn’t happen here.

The simplest explanation for the rise of populism on the right is that people were always in favor of the welfare state as long as they didn’t see the money going to minorities or those they consider undeserving, but there used to be an elite that was too intelligent and honest to go along with the mob completely and therefore willing to do the difficult job of at least trying to put the country on a sound long-term financial footing. Yet this elite wasn’t ever strong enough to push through entitlement reform given the state of public opinion and unified Democratic opposition.

Right-wing populism isn’t simply economic leftism though; it still maintains its opposition to taxes. Mainstream Republicans used to combine an unpopular view, that is spending cuts, with a popular one, keeping taxes low. Populism retains the portion of the agenda that appeals to the public while getting rid of the less palatable parts, and declares itself morally superior for “taking on the elites.” It’s the ideology of you can eat ice cream all the time and never get fat.

In a broad sense, Trump governed economically as a populist, not a conservative. His major legislative achievement was a corporate and individual tax cut, but he did nothing to rein in entitlements. Paul Ryan now says that he fought with Trump about Social Security and Medicare all the time, but the president wouldn’t budge. Despite what his cultists think, Trump has never been one to sacrifice his political fortunes for the long-term well-being of the country. In fact, Bush, despite his failed attempt at Social Security reform, also cut taxes and even went further than Trump by creating a new entitlement in the form of Medicare Part D, showing that this is a problem with our political system more than it is about the failure of any one politician.

I’m not completely negative on populism. It was absolutely essential in the midst of covid insanity. In many ways, the old GOP establishment has been historically deficient, particularly when it bought into left-wing framing on civil rights related issues. I wholeheartedly endorse fighting CRT, going after DEI at the universities, and the school choice movement. These efforts have succeeded to the extent that they have because they involve positions consistent with both populist energy and Reaganism, focusing on getting hostile elites out of the business of engaging in or subsidizing social engineering. But on economics, populism has brought Republican politicians closer to their base, which means less enthusiasm for cutting spending. We already have one national party that is opposed to any reduction in entitlement benefits. If we end up with two, the long term future of the country is going to be grim.

The Bill Will Become Due

Interestingly, within the Republican coalition the most enthusiastic Trump supporters include individuals who are both most and least hostile to cutting entitlements. You have JD Vance and actual true believers in economic populism on one side, while at the same time the Freedom Caucus also enthusiastically backs the former president. I think that a lot of this is simply attitudinal. Trump pisses off the right people, so those driven by resentment towards the left and elites more generally latch on to him. More of it is probably political self-interest; the people of Appalachia love Trump, so Rand Paul in Kentucky and JD Vance in Ohio buddy up to him, even though they have very different economic views. Trump is happy to be friends with both of them because he only cares about whether you personally like Trump. And since there was no immediate budget crisis during his presidency, Trump did not have to choose between cutting benefits and raising taxes, which kept everyone in MAGAworld happy.

For other parts of the budget like defense, government simply borrows money. Social Security and Medicare were designed differently, with the programs supposed to be able to pay for themselves. But they are both projected to run out of money within a decade or so. At that point, if government does nothing then seniors will see steep cuts overnight. Alternatively, we could finally undertake entitlement reform before that point. Another possibility is to simply pass a law changing the system to one where entitlement programs no longer have to be self-funding, but such an option would likely shock the markets and just be another version of kicking the can even further down the road.

The upshot here is that the conservative movement will still be around in 2033, and at that point it is going to need to negotiate with Democrats. Since my audience is primarily right-leaning, I focus on telling Republicans what they should do, and take the other side’s preferences as given. Right now, Republicans oppose both tax raises and cutting entitlements. But they will have to decide which is worse.

Riedl points out that the entitlement explosion is not going to be paid for by tinkering around the edges. Extremely tough choices are going to have to be made, as the table below shows.

Social Security and Medicare face shortfalls of 5.5% of GDP by the 2040s. But raising everyone’s income tax by 10 percentage points, for example, would only cover 3.38%. A 20% national sales tax would raise only 2.75% of GDP. So for payments to continue as they are, it will require Americans to take a major hit in their standard of living.

I have no hope that anyone is going to run on cutting entitlements right now. The nature of the issue is such that the earlier you reform the system, the easier it’ll be. Doing something in 2005 would’ve been better than working on the problem now, and trying to do something now gives you more flexibility and options than waiting until 2030. But politics is a real thing, and Trumpism has triumphed over Ryanism for a reason. One furthermore can’t even be sure that Democrats would be good faith partners if Republicans did want to negotiate. There’s a prisoner’s dilemma-type problem here, in that if either party tries to get serious about entitlements and deal with them in a reasonable way, the other side will pounce. Previous deals that have kept entitlements on a sound footing have relied on bipartisan commissions in which neither side could blame the other since both parties were in on it, sort of like how a gang will have everyone shoot a victim at the same time so each individual has blood on his hands and can’t run to the police. This is harder to do in an era of hyperpolarization, where the two major political tribes hate one another and will take any advantage they can in order to score points and win elections.

The question then becomes what exactly Republicans do when circumstances force politicians to deal with the budget crisis. What will their opening position be in their negotiations with Democrats? What will they give up relatively easily, and what policy proposals will they in effect treat as red lines? It is important that at that point the Republican Party not be filled with politicians who believe that protecting elderly privilege is more important than ensuring that future generations are able to make a living and raise their families. One worldview that won’t survive the coming crisis is the idea that all problems will go away as long as you make sure Zelensky is living in a cardboard box. Populism can run up the bill, but has the good sense to flee the scene when the check comes.

Elderly Privilege or Dynamism?

So what position should Republicans take in the coming entitlement negotiations? It’s important to begin by realizing here that seniors are the most wealthy demographic in the country by far, protected by anti-discrimination laws, and otherwise privileged by all kind of ways in which our government works large and small, including seniority based pay, and regulations that drive up the price of housing. Any change to entitlements will still keep seniors as a favored class, since even when these programs can pay for themselves they still involve a major transfer of wealth from the young to the old. The question is how much elderly privilege will be either rolled back or increased, potentially to the point that it crowds out other forms of government spending and strangles all prospects for economic growth.

Ironically, right-wing populists tend to worry a lot more than most other people about low birth rates. Vance himself caused an uproar when he blamed society’s problems on the “childless left.” Yet there’s an obvious tension between wishing people would reproduce more, and transferring money from the time of their life when they’re able to have children to when they in effect no longer can. As Riedl has noted, in Europe they pay high taxes but it often goes to things like childcare. A refusal to cut Social Security and Medicare means we are headed to a point where everyone else suffers a massive reduction in their standard of living so that elderly Americans can continue to live as the wealthiest large class of people in human history.

The problem isn’t simply that entitlements transfer money from one part of the lifecycle to another. By taking a higher portion of earned income, government reduces the incentive to work. If Americans decide to have fewer children when they’re young because they’re taxed too highly, we will also see a population decline that will make all other problems more difficult, including keeping entitlement programs solvent in the future. A country where young people are struggling and ultimately remain childless so old people can hang out in Margaritaville on permanent spring break is the dystopia we’re all headed towards.

What is important to remember is that refusing to cut entitlements does not simply transfer a bigger share of the pie to the elderly. It also decreases the size of the pie, and makes the country worse off in the aggregate.

Populism tells itself a story in which the old GOP establishment wasn’t willing to be serious about the issues facing the country. The insurgents had a point when it came to cultural matters, although even here they seem to have an exaggerated sense of what government can do. Sure, we should roll back civil rights law, but many of the broad trends involving things like secularization, white guilt, and greater tolerance for minority sexual preferences are not primarily the result of anything the government has done. When it comes to the federal budget, however, the job of politicians is to decide which path the country takes. One of the weird things about populists is that their political movement spends a lot of its energy seething over things government cannot control while largely ignoring what it can, that is when they aren’t making things worse by attacking other Republicans that have shown courage by trying to take a leadership role on the entitlement issue.

One could advocate a kind of “effective conservatism,” where everyone runs on protecting entitlements but there’s a secret cabal in the back that understands the problems that the country faces and will do what needs to be done when the time comes. This state of affairs to some extent exists now, with elderly constituents who vote Republican because they are angry at illegal immigrants often sending libertarian ideologues to Congress. Unfortunately, a rhetorical embrace of populist economics ends up leading to true believers in that cause coming to power. I think many or most Republicans in Congress today would cut entitlements if they could have a secret ballot on the issue, but that number is going down as more politicians sympathetic to populism get elected.

When the time for negotiations comes, Republicans should seek changes that to the greatest extent possible focus on cutting benefits and not raising taxes. Again, reductions for the richest among the elderly should be low hanging fruit both parties can agree on. The end result should be a welfare state with a higher retirement age, and smaller benefits that are means tested.

None of this will be easy, which is why populism has succeeded in the first place. The politics of cutting entitlements deserves its own article. For now, I’ll just say that if we’re going to accept political difficulty as an excuse for inaction on an issue this important to the future of the country, what are we all even doing here?