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Debt and a tough-talking governor

Indiana's Republican governor, Mitch Daniels, proposed focusing on the biggest components of future deficits, including defense spending and entitlements for seniors.

February 17, 2011|Doyle McManus

President Obama's new budget contains no serious proposal for solving two of the biggest fiscal problems facing the federal government: Medicare and Social Security. And though Republican leaders in Congress are happy to take swipes at his proposals, they haven't come up with a serious plan of their own to fix those popular programs either.

But last week, one potential Republican presidential candidate took the brave step of proposing major changes in both Social Security and Medicare.

The governor of Indiana, Mitch Daniels, bluntly told the Conservative Political Action Conference in Washington that the nation's debt is our biggest problem — "the new Red Menace, this time consisting of ink," he said — and that his own party hasn't confronted it squarely enough.

"In the cause of national solvency, [earmarks] are a trifle," he said. "Talking much more about them, or 'waste, fraud, and abuse,' trivializes what needs to be done and misleads our fellow citizens to believe that easy answers are available."

Instead, Daniels proposed focusing on the biggest components of future deficits, including defense spending and entitlements for seniors.

He said it was time to "sunset" the current versions of Social Security and Medicare, maintaining them for current recipients and soon-to-be recipients but designing wholly new insurance plans for the generation that follows.

"These programs should reserve their funds for those most in need of them," he said.

"Medicare 2.0 should restore to the next generation the dignity of making their own decisions, by delivering its dollars directly to the individual, based on financial and medical need, entrusting and empowering citizens to choose their own insurance and, inevitably, pay for more of their routine care like the discerning, autonomous consumers we know them to be."

He said he hasn't worked out detailed proposals for his two new programs yet, and, in any case, he says there would have to be long negotiations toward "new Social Security and Medicare compacts" with younger workers.

But in plain English, what he's suggesting is a new system that would provide more benefits to the poor than to the wealthy, making Social Security and Medicare look a little more like welfare and less like insurance. "Why do we send a pension check to Warren Buffett?" Daniels asked last year.

That kind of talk is certain to give defenders of the traditional programs fits; Social Security and Medicare have always been popular, in part, because their basic benefits flow to rich, poor and middle class alike.

For Social Security, he's proposing a higher retirement age, just as the Simpson-Bowles deficit-reduction panel did.

And for Medicare 2.0, he's essentially proposing a voucher program, in which the next generation's senior citizens would choose their own private health insurance plans on the open market, paid for by the federal government — up to a monetary limit.

"Our proposals will be labeled radical," Daniels acknowledged in his remarks to CPAC, "but this is easy to rebut. Starting a new retirement plan for those below a certain age is something tens of millions of Americans have already been through at work.... When they attack us for our social welfare reforms, we will say that the true enemies of Social Security and Medicare are those who defend an imploding status quo."

And he added, in an echo of the "compassionate conservatism" of George W. Bush, who hired him as director of the Office of Management and Budget in 2001:

"We must display a heart for every American, and a special passion for those still on the first rung of life's ladder. Our main task is not to see that people of great wealth add to it but that those without much money have a greater chance to earn some."

Daniels' bracing fiscal message won praise from "tea party" conservatives for its uncompromising insistence on balancing the budget, but it's by no means certain that the radical changes he advocates making to future programs for seniors would translate to broad support should he decide to run for president.

When I e-mailed Daniels' office last week to ask him to expand on a few points, my phone rang half an hour later — with the governor himself on the line. He's passionate about this stuff.

Wouldn't his blunt proposals on Medicare and Social Security make it more difficult for him to run for president?

"I disagree," he replied. "I don't know how you can run for president and not talk about these issues in a very frontal way." In any case, he added, he hasn't decided whether to run, although he acknowledged he's thinking about it.

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