tv QA with John Cogan CSPAN December 4, 2017 12:18pm-1:18pm EST
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it is called "the high cost of good intentions, the history of. u.s. entitlement programs." john: thank you very much. >> i left omb in the mid in 1998hen returned to serve as the deptive omb then left again and returned stanford. >> what were the lessons that thelearned working at office of management and budget. >> what were the lessons that you learned working at the office of management and budget. well it seemed it was toward
spen.d more as you know ronald reagan more than any other president. how powerful they were. >> the biggest surprise in the if. was fr >> yes. yes. tell that story. true with social security. but the franklin roosevelt of was not like the franklin roosevelt of 1933. franklin roosevelt in 1633 managed to roosevelt of 1933. in his first year in office, he removed nearly $400,000
i disabledd war the rolls he re duesed by 50 percent and extra in ry change in the whole history of entitlement programs. interesting about it was the way he went about it. entered office, of course, we prn the midst of a great depression. the federal budget was in shambles. he had campaigned on promise to get the federal finances inner control, topped do so by raining in government spending. veterans programs accounted for 20 percent of federal spending at the time. to do something about programst very rans look was going to control spending. so self reason days after taking office, he asked congress for the authority to modify all veterans
entitlement programs. ad sent up to the hill proposal that congress abolished all entitlement programs for veterans to give him the authority to right the regulation and set benefit levels. continue days later, congress passed the economy act which did so. within the next year, the administration wrote thelations, changing benefit levels, changing eligibility rules, and the result was nearly 400,000 from thewere remove removed roles. what was most interesting to me about roosevelt's actions fact that hee took action right away on the strength is at the maximum right after the election. he was i would say a brilliant politician. to mod foy the bonus marchers that had returned to
you mayon, so as recall the year before, a group of bonus marchers came ofand were driven out washington by such soldiers. >> what are bonus watcher ifs bonus watchers were world war i veteran, who had been benefit, inonus addition to their that promise but had been made years earlier aboute payment was due 10-15 years done this road, so they wanted that bonus payment now. were suffering from the depression. they wanted the bonus payment now. watched to washington to demand the bonus payment in 1632. they gathered and set up aroundand i think 20,000 of these bonus marcher marchers, the government was worried about communist infiltration and so forth, and general mcarthur, ordered the american troops to
the bonusut marchers and was large scandal in american history as one american soldiers drove out a group of american veterans from the nation's capital. killed?e one individual was killed during the action. thene bonus americans returned in 1933 to protests against the proposed reductions and again to claim promised benefit. roosevelt was very different hoover, though. his solution was to send camps andt to the have her sing songs and listen to the veteran's plight and sympathize with them. he also offered them jobs. 25,000 civilian conservation court job was be set aside for veterans with those two actions the veterans went away
was able to go through with his regulatory changes. economy act in 1633 which is right after he is in the office was what? what did that do? >> oh, what that did was it repealed all federal entitlement programs for peppizationme benefit and repealed the rasp hadnt that vet to world war i disability repel rebellion benefits, spanish american war benefits. the only entitlement program the was excepted was civil war pension program. in addition it allowed the then to set the new rules of eligibility and allowed him to set new benefit levels. >> you say the night before, that was introduced he had the first fireside chat, and this fireside chat seems to me,
had 30 some like twitter in those days. of fdr.an excerpt >> i can assure you, my that it is safer to keep your money in a reopened bank, that it is to keep it the mattress. the success of the whole national program depends, of course, on the cooperation of public, on the intelligence support, and the use of the relike still systems. is he doing sneer well, during that speech, he was tackling the main problem with the private financial system which was the banking crisis. thatve so many banks have failed. that point, that evening he too took the opportunity deal well the problem that he had with the congress with respect to the economy act. he was worried about a senate his bill. of the house had passed the bill
already then the next week he senate.ng up in the so worried about the, about the filibuster, he deviced a prevent the fate from filibustering him. he decided it was time for a as he told his senior staff that night. a proposaloduced that would allow for the sale of 3.2 beer. so it was prohibition at the time. popular.wildly and so under the senate rules, to vote on the 3.2 beer proposal, they had to first dispense with the economy act and so, of course, passed the economy act without a filibuster, so they beer get to the 3.2 bill. and they did so. bills pass. both bills became law. >> as you said in the middle longer vets are no going to get the pension
benefit. let me go to the whole point of the book. what is an entitle. >> that is a very good question. "entitlement" has come to mean many different things to many different people. to some people, an entitlement is something that just cannot be taken away. that people have an absolute and ir ref cable right to. other people regard pensions entitlements as an unearned benefit, as something that away, and inn fact, something that is not really doe served and is gin from an earned earned right benefit like social security. latter groupthe say social security its not an entitlement. that is a very bad word. earned their benefit. where as a food stamp benefit, an entitlement. but in the simplest term, the benefit, or
entitlement program is originates with a law that gar renn tood a benefit guaranteed a benefit under the law. >> it created the need for entitlements? >> well, i would have to say, try.e 16th cep then 19th century was the primary driver behind entitlements. all of them. >> the first one if. >> good question. first entitlement program was a program for veterans,ary war and the idea was to compensate them for the loss of life or while in service to their country during the war of independence. that was the first entitlement then throughout the 19th century, during every war, we established a similar entitle
veterans of those war. >> you say it was disability it spreadbut then to people who just were in the service, then you say, the wives. right. is >> explain how that happened and when. yeah. phenomenon that i am about what happens when an entitlement program is created, the eligibility pool is a very narrow group of particularly worthy people that are usually deemed to be eligible for benefits. then, over time, a group that is ust outside that eligibility circle begins to clamor for benefits and pressure congress to be included among the receiving benefits. ventually, congress acquiesces those individuals end up qualifying for benefits.
that just starts the process all over again. another group of people closer to the eligibility boundary line starts clamoring for benefits. congress eventually acquiesces. eligibility expands. we start always with a very small group and it spreads outwards. to a point where the original purposes of these entitlements is no longer recognizable. so for the civil war program, the original entitlement program for disabled revolutionary war veteran was confined just to members of the continental army and navy. they were a federal responsibility. but then 20 years later they wanted to include members of the state militia. volunteers, these individuals were no less deserving of the -- assistance as those who had served in the continental army. by the 1830's, congress had
extended the program to include anyone who had served in a revolutionary war for at least nine months. the next entitlement program, large entitlement program was the disability program for union veterans during the civil war. that program followed almost exactly the same path. first benefits were confined to those who had been kiss abled -- disabled during wartime service. 30 or 40 years later, virtually all union veterans who have served their country in the civil war were made eligible for assistance. that has been the pattern that has driven entitlement in the modern era as well as during the 9th century. brian: in your introduction, you say 55% of all u.s. households received cash or assistance fro brian: in your introduction, you at least one major federal entitlement program, let me read n.
among all households headed by a 40% n under 65, over eceive entitlement benefits. 85% of households led by a single mother received benefits 85% of households led by a single mother received benefits and nearly six out of every 10 children receive benefits. 58 percent are growing up in a family under an entitlement roles. how long has it taken us to get to 55% of all households receiving something? ohn: about 70 years now. most entitlement programs begin ith good intentions. the veterans programs, the intention there to provide compensation for workers -- soldiers that had been disabled during the war. you could hardly think of a more honorable purpose for a program. the new deal of entitlements and great society of entitlements,
they had very good intentions to provide a safety net of assistance against old age poverty, to provide protection against poverty for those who cannot provide for themselves. these are goals everyone in merica shares. what we got today is described with those statistics from the book is a system that does not bear any resemblance to those basic goals. that is the nature of the growth of entitlements and that is why we have a problem today. brian: here is more from fdr, beautiful black and white done by the minneapolis pbs station. he's making fun of the republicans. thelet's watch. as we believe in social security, we believe and work for the unemployed, we believe in saving homes. cross our hearts and hope to die. laughter]
president roosevelt: we believe in all these things, but we do not like the way the present administration is doing that. just turn them over to us. we will do all of them. we will do more of them, we will do them better, and most importantly, the doing of them will not cost anybody anything. [applause] brian: sounds a little familiar. john: doesn't it? what a masterful politician. that has been the promise of those that proposed one entitlement program to another. you can have it, i will give it to you and it will not cost the country a dime. brian: so who has been better or worse at this over the years? republicans or democrats? john: i have to say this has truly been a bipartisan
effort. as you go back to the 19th century, with the civil war pension program. it was during that era that the republicans used pensions to gain an electoral advantage. in fact, the pension program helped realign the public behind the republicans during the 1890's. they held the white house, the house, and the senate for helped realign the public behin consecutive years. i think largely because of tariffs and the pension program. the democrats were generally opposed to pensions until they caught on in the first decade of the 20th century. in the modern era we see the same phenomenon, except the parties flipped. the democrats have been the proposers of all the new entitlements and the republicans have stood in opposition, initially. once they have gotten to power after an entitlement has been
created, they have generally supported the expansion of those entitlements. brian: we have some video on both sides, but on the one hand, then several years later on the other hand. let's start with harry reid. let me just check the dates here. the first part is 2006, the second part is 2013. here is harry reid. >> today the senate is considering a bill to increase the nations debt by $781 billion. f adopted, it would be the fourth such increase in five years that this administration has been in office. i will be opposing this latest request and i hope that people on both sides of the aisle will do the same. it allows the united states to meet its existing obligations should be the standard.
brian: the first time george ush was in office, and the second time he was not. [laughter] brian: before you comment on it, let me put these two together. here is speaker of the house paul ryan. first is in 2011 and the second is in 2017. [video clip] second time he was not.>> if wet our budget on a sustainable path, then we're choosing decline as a world power. the unsustainable trajectory of government spending is accelerating the nation towards the most predictable economic crisis in american history. >> you are not prepared to say that you are insisting on revenue neutral tax reform that does not add to the deficit? >> we want the economy growing that will get middle income taxpayers a tax cut. we want to keep american businesses in america. that is more important than anything else. brian: what are we supposed to believe, who and when are we supposed to believe? john: consistency has never been a hallmark of members of members
of congress. it's been reluctant to single out individuals for criticism. t is a far larger problem than any single member of congress. it is a problem with the institution, it is a problem with the presidency. like i said, it is a problem that has gone on for 200 years. these force that is are operating on our congress, on our elected official, are just powerful forces. what you are seeing what, we saw with paul ryan, and what we saw with harry reid, are examples of how individuals react to those pressures. pressures to be reelected. brian: go back to your government experience. what were the first years that you are there? john: 1981 and 1982. i was assistant secretary at the labor department. brian: what was your big take
from that experience? john: it was just how difficult it is to rein in these entitlement programs. 1981 and 1982 were years of a very, very deep economic recession as the federal reserve and administration tried to ring inflation out of the economy. the recession that we had was a deep recession that we had had since the end of world war ii. so, immediately, that recession caused congress to start rethinking the wisdom of the initial reductions that it had made in the various entitlement programs. i saw this tremendous pressure coming from the hundreds of lobby groups that have been formed around these programs that gained their sustenance from these programs. from the general public for some
relief from the hardship of the rethinking the wisdom of the recession, but the pressures were just overwhelming. there was a cry for reagan to stay the course, and that meant keep those tax rate reductions that you had put in place, and tcheeps budgets savings that you had put in place. do not give up on them. i think reagan was very, very strong in not giving in to those pressures that were operating at the time. brian: who was your secretary of labor? john: it was a wonderful man, raymond j. donovan a terrific young man. actually, a middle-aged man who was treated very, very badly by washington. as you may recall, ray, after serving for almost four years as secretary of labor and undergoing an enormous number of investigations, including special prosecutor, all of which had shown that the charges that
had been made against him were completely made out of whole cloth. the district attorney of the new york indicted him on the same charges and he had to resign from office. truly a sad, sad washington story. brian: i am not sure this is the exact quote, but my memory was, he said, where do i get my good name back? john: that is right. brian: you have watched a lot of governments since then. is it too big a risk today to come to government because of what happens once you're in it? john: there is a risk. the important thing about ray donovan was that he was exonerated of all charges and walked out of the courthouse to make that famous, famous comment. i would say this, yes there are risks associated with public service in washington. but i would say to young people, do not allow that risk to deter ou from service.
from my own standpoint, public service is one of the most enjoyable, one of the most interesting, one of the most rewarding periods of my entire life. i do believe that young people should experience the same, and do the same and try to do something good for their country. brian: what was the second time you are in government? john: i moved from the labor department to omb and i was at omb for 3.5 years. i had most of the entitlement programs under me. then i left washington and came back in 1988 as a deputy. brian: so you were in the ronald reagan administration. if you came in 1980 and was still ronald reagan. when did you leave government forever? john: i left in the spring of 1989. brian: did you have any impact on reducing the entitlements when you were the deputy, or even before that? john: very, very little. very little.
brian: is this society of a mind that, it should not just be 55%, maybe it should be 75% of entitlements. john: yes. es, yes. there were some successes. entitlement spending under the reagan administration was not cut by normal accounting. what we did was slow the growth. the growth was slowed by about 50% over the eight years. so, there was an accomplishment there. but the programs remained in place when ronald reagan left office, then, since then they have grown back. the reduction, if you will, and the reduction, if you will, and the growth spending was really just a temporary reduction. brian: we hear that all the time. isn't that just a gimmick politicians use about the growth? let me ask you this. nobody seems to think that the debt the matters again. at alldick cheney said, who cares . about the debt?
so are we just going to jack -- keep jacking bit debt up to $20 trillion as we have it now? ohn: history teaches us that excessive debt will eventually cause a financial crisis. history does not provide us with much of a gide, at what point, how high that debt has to be efore the crisis will hit. brian: when did it do it in history? john: let's go back to germany. it is a very good example of where they had an enormous debt problem after world war i. john: let's go back to germany. it is a very good example of where they had an enormous debt problem after world war i. they chose to deal with that debt problem with inflation and the german hyperinflation was one of the most extraordinary economic events of the 20th century. it practically ruined the economy and led to the rise of nazism. some very severe onsequences. history doesn't tell us too much
when precisely that debt crisis is going to occur. we know it will occur, we just cannot say when and we don't know how severe it will be. whe crisis is going to the 2008, 2009 financial crisis should be a good lesson for people thinking about the consequences of entitlement programs. government officials did not see the great recession of the great financial crisis coming in 2006, 2007. wall street did not see it. few people saw that crisis coming. all of a sudden it was upon us. that crisis was driven by excessive wall street debt. brian: the only people that lost were savers. if you were in the market and stayed in the market it went from 5800 up to 23,000. people that do not make a lot of money cannot save a lot of money and even those that want to save money cannot make it dime. john: the consequences of that
economic crisis are present today. the low interest rates we have and the inability of people who have done the right things through their life and prepared for retirement, they are suffering from the consequences of that economic crisis. think about it. hat economic crisis was really generated by one secondor of the economy. that's debt crisis brought on by a federal government is a far bigger crisis with far bigger ramifications. so as severe as that 2008, 2009 recession was, the consequences of not dealing with entitlements against our debt are far, far more severe. brian: so many politicians on both sides talk about the middle class. want to help the middle class. reduce the tax for middle class. help the middle class.
they actually are punished in this process. john: they have been. brian: nobody talks about that. john: that's right. it's an extraordinary phenomenon where the last 10 years especially, middle class wage earners have received very little in the form of wage increases. retirees have been able to earn only pulsery returns on safe investments. they have been able to go into the stock market at great risk, something something there. but by and large the great part of the middle class has been economics economics that we followed in the great recession and the period leading up to the great recession. brian: you are talking that politicians that make the
decisions on entitlements have good intentions, but you also say it is an electoral decision, a political decision. so how do you mesh those two? this is all for the good of our people and we have good intentions. i am doing this for the people i am also doing it to get reelected? john: entitlement programs stem from a basic human desire to help someone who is in need of assistance. it is just common. all of us have it in us. for politicians it is a little easier. of course, it is somebody else's money. but they still have that same desire that you and i do.desire that you and i do. they also have this desire to be reelected. once that entitlement is put in place, then the game has changed. interest groups form around protecting that entitlement, pressing for more assistance. money starts flowing to politicians who protect those benefits, and the game changes.
it is that desire for reelection that drives a lot of entitlements. brian: but how difficult is that for somebody to give someone else's money away? john: it is pretty easy. that is why they do it. brian: and then they get praise and voted back in from their constituents. we are in this period now, and this was recorded before any decision was made on the tax bill, where you got to keep your eye very closely on what is going on. john: you absolutely do. i would say this about the tax bill if i could. the way i think about the entitlement problem is we have to reform these entitlements clearly to make them affordable. but if we can get economic growth stronger, faster, we will increase the amount of resources that are available to financing those entitlements. it will lighten the burden of financing those entitlements a little bit. so when people think about
solving the entitlement problem or our debt problem, i think economic growth belongs very importantly in that equation. brian: what if you don't get it? john: we are in real trouble. brian: mick mulvaney, who is the office of management at director, was very much against not paying off the debt, and now he is in charge. let's watch this. [video clip]>> i do want a balanced budget. we have got to start balancing budgets. these people are talking about balancing budgets 35 years from now? believe me, much quicker. we can do it quickly. >> he even made a pledge to get rid of the debt in eight years. we won't be able believe me, mu budget this year, but we're trying to get it to balance within the 10-year budget windo which is what republicans in the house and senate have done. >> so the goal is to have a balanced budget within 10 years,
but basically that means you will add to the debt every single year in the next 10 years. brian: why is it that in every political campaign, promises are made and they never, ever do what they are promised to do when it comes to the debt? john: it is really sad, isn't it? brian: what are we supposed to do as voters? john: the political climate right now is really not at all onducive to any kind of change in government spending. i don't think we have any good in government spending. sense of how to get it done. i think washington really needs to step back and take a long look at how they have handled entitlements and government spending. it is really a very unfortunate circumstance, and quite honestly you go back and look at history, it really doesn't give you much reason for optimism. brian: you say in your book it is going to take a crisis. john: i think it probably will
take a crisis. hopefully we can begin to address the problem before we get to that crisis point. brian: here is richard nixon back in 1968 talking about the public and what they really want to feel when it comes to money and whether they want entitlements or not. [video clip]pres. nixon: government can do a lot of things for men. it can provide him food and a house. it can provide him clothing. but it can't provide him dignity. it can't provide him pride. it can't provide himself respect. brian: is that still true? john: i don't think people should look to government for pride and self respect. i don't think people should look o government for benefits. i think we need to look at ourselves for our pride, for our dignity. i think we need to rely on our
own initiative, for our food and for our shelter and for our children. brian: what did that president do for entitlements? john: most people think of richard nixon as being a conservative. i argued in the book that richard nixon was every bit as expansionary when it came to domestic spending in particular entitlements as his predecessor, lbj. i labeled a chapter on richard nixon's presidency as great society two. lyndon johnson's great society, rian: what's the difference in those two? what did lyndon johnson do with the great society versus the great those society ii. john:we saw the enactment of medicare and the medicaid program, two very large entitlement programs. but mostly the great society was
increasing what we think of as discretionary programs. programs for education, training, a large number of social services, where the money went directly to cities and interest groups in the cities. richard nixon was a little different. richard nixon did not expand programs that much for education and social services, but he did expand entitlement programs tremendously. in fact, he created a federal nemployment insurance program. nationalized the food stamp program which was a very small program when he took office. he created the supplemental security income program, which establishes a federal floor on program which was a very small program when he took office. income for the disabled and the oor elderly. he was a very big entitlement xpander. in fact, he would have gone
farther, or tried, but congress wouldn't wouldn't go along. the proposed the national health insurance plan very similar to the affordable care act, and he proposed federalization of the entire welfare system, which congress did not go along ith. o richard nixon ranks right up there along the top entitlement expanders of any presidents in modern american history. brian: originally when medicare was passed, what did they expec there along the top entitlement expanders of any presidents in to happen, and where were the republicans when that vote was taken? john: the republicans had opposed the enactment of medicare all wait through the 1950's and the early 1960's. as did the southern democrats who controlled the relevant committees in congress. and then with lyndon johnson's weeping victory in 1964, the southern democrats came along to support medicare, in particular will wur mills chaping interested opposing to supporting. and a handful of republicans, i
think there were four republicans, that joined in support of enacting medicaid. and the bill then ended up passing. i'm sorry, medicare. after that initial opposition, however, the republicans have in the intervening years supported expansions of the medicare program, as have democrats. and that is really a very typical phenomenon during the post-world war ii era. entitlements in acting -- -- enacted by a democratic administration, then republicans get the in power, and those ntitlements are continued. opposition by republicans turns to support. and the entitlement gross -- grows. a good example of that would be the prescription drug benefit under president george w. bush. brian: hold it there. let's go to video of george w.
bush in 2003. a lot of people said this was in anticipation of the 2004 election. let's watch. [video clip]pres. bush: in a few moments i will have the honor of signing an historic act of congress into law. i am pleased that all of you are here to witness the greatest advance in health care coverage for america's seniors since the founding of medicare. [applause] brian: how much did that help him in the next election? john: hard to say. i honestly don't think it helped very much. i think they thought it would at the time. hen that idea was originally developed, it was in 2001. in 2001 the budget was in large surplus. and of course, there is nothing to stimulate interest in expanding entitlement as much as a government surplus.
so really the momentum for this prescription drug benefit got going in the early part of the administration, well before his. brian: another theme in your book, that when secure plus occurs, they spend. john: that is exactly right. for people today who haven't seen a budget surplus in 20 years, it doesn't seem relevant, but throughout history, whether the surplus is in the budget as a whole or the surplus is in a special account like a social security program or special trust fund, every time there is a surplus the pressures to expand entitlement gets magnified, and congress will eventually spend the surplus to expand entitlement. the problem is many of these surpluses are generated by an upswing in the business cycle. economic times get good, revenues pour into the treasury
social security system, and a surplus or a big balance builds up. but that balance or surplus is only temporary. eventually the economy is going to go back down to normal and sa surplus or a maybe into a recession. but congress has taken those surpluses and and acted -- and enacted a permanent expansion in entitlement in response to the surpluses. so it ends up being more of a permanent increase and you get deficits. brian: if i said i want to get a camera crew and you, and let's go show the public where the social security trust fund is, where the money is come where the certificates are, where would we go? john: well, you'd go to parkersburg, west virginia. the story of the creation of the physical representation of the trust fund is a very interesting one. throughout the 1980's and early 1990's, the social security system, because of the growing
economy, developed about $1 trillion in surplus funds that was allegedly sitting in this account. members of congress would go back to their districts for their town meetings and people would ask, if there's $1 trillion there in the social security trust fund, where is that trust fund? the members didn't know because there wasn't one. it was just a ledger in the treasury department book. so they came back to washington demanding that their leaders do something. there is a very ingenious congressman, a democrat from indiana, and he had the terrific idea to create a physical representation of the trust fund. they passed a bill that would designate a public building as the location of the social security trust fund. brian: is this a joke? john: no, this is the honest to god truth. in 1994 the bill passed, so they set aside a building in
parkersburg, west virginia as a bureau of the public debt building to house a file cabinet and a computer to be the trust fund. the computer would print out certificates that represented surplus revenue and interest payments and some government official would sign it and stick it in the file cabinet. brian: where is the money? john: the money was sitting in the united states treasury, ready to go out in the form of a payment to a defense contractor or a contractor in he education department. government money if you will is fungible. goes into the treasury, goes out of the treasury. brian: what happened to the idea of creating a trust fund, keeping the money there, and spending it on retirees? john: it was a grand idea, and it was roosevelt's original idea that social security should be self-funded. social security should be a program whereby the individuals
-- payroll taxes that individuals pay into the program are set aside and available to fund their retirement benefits. the reality is, in the 1930's, once that surplus started getting built up, congress realized, my gosh, it is a honeypot waiting to be raided and they moved to a system that was pure pay as you go, where the benefits going out would be no greater normal times than the revenues coming in. brian: as long as we're talking about west virginia, what is the story of the coal miners and robert c. byrd? john: in 1969, it is a good example of how little events can sometimes create big entitlement programs. there was a farming -- sorry -- coal mine disaster in
farmington, west virginia, several miners were killed in this accident and it generated a response in washington to regulate the coal mines. i think it was a sensible law to regulate the coal mines. but in the process, mr. byrd and other members of congress decided it would be a good idea o compensate coal miners for black lung disease that they might incur from their years of working in the coal mines. the opponents argued that this should be a workers compensation benefit to be handled by the states. mr. byrd and others argued, but there is none. we need a temporary program. so they enacted a temporary black lung benefit program that entitled coal miners to a monthly disability payment. it was only a temporary
program. but of course, several years later when the authorization of that program was about to expire, congress looked around and no state had adopted a workers' comp program for their coal miners, so they said, we need to continue this, and they then re-authorized the program. the program is still around today. it has achieved virtual immortality, in the words of ronald reagan. brian: we have been all over the place, but i want to ask you about this book. what's in this book if somebody wants to read it, what will they learn that we are not talking about? john: what they would learn is that the history of entitlements and the behavior of entitlements that they see today goes back a very long time, and that the forces that are at work on congress and on the executive to expand entitlements are forces that are very powerful. they need to be recognized. they need to be dealt with. and hopefully when leaders
-- readers understand the nature of what drives these entitlements, we will all be in a better position to come up with some lasting and effective changes to make these entitlement programs more affordable. brian: is it possible? john: i believe it is. i believe at the end of the day it is. brian: what gives you a sense that it is possible? john: i tend to be an optimistic guy. i realize there are very few historical reasons for optimism, but america has faced all kinds of difficult problems in the past. there have been tremendous challenges that we as a country have faced. this entitlement problem is of a drirch sort than our problems in the past. but we have risen up in the past to solve them, and i think we would do so here. brian: what percentage of the budget is entitlement oriented? john: right now it is 2/3 of the budget. brian: what would have been 150
years ago? john: oh, my goodness. well, 150 years ago it would have been about 10%. but the civil war pension program that we talked about was one of the great entitlement programs in the 19th century. that drove entitlements up to 40% of the federal budget in the 1890's, 30 years after appomattox, and it eventually then died down as the soldiers of the civil war eventually passed on. brian: where would you put today in relationship to our 200-year-plus history? john: for the last 70 years since the new deal, entitlements have been growing and growing relative to the economy. a larger and larger fraction of our goods and services are being transformed into entitlement benefits that go from one group in society to another.
brian: but isn't that good for the society, the people that are out in the united states now have more money than they had ever had if the entitlements have grown? john: absolutely not. entitlements come from one group in society and are given to another group. brian: but they are the privileged, the ones that make all the money have to give the other side some money. john: oh, no. this is a -- you're raising a good point. we think of entitlements as mainly programs to alleviate poverty. the reality is that a minority of the dollars we now spend through entitlements go to alleviating poverty. my calculations are only about 1/5 of the $2.4 trillion of entitlement spending actually goes to alleviate poverty. brian: 1/5 of the $2.4 trillion every year -- john: goes to alleviating
poverty. the rest goes to people who were not in poverty to begin with or goes to people that have already been raised out of poverty by other entitlement programs. brian: but somebody is watching right now and saying, look, i paid into social security and i paid into medicare. don't tell me i don't deserve that back. john: and i would say to them, as far as social security goes, yes, you have paid into social security, and i can understand your desire to get your money back. but you have to remember that the reality is that money that you put in has already been spent. the money that is going to finance your benefits -- and you have in some sense earned them -- that money is coming from the pockets of workers in their 20's, 30's, and 40's. brian: but that is not their fault. john: it is not their fault at all. no, it is not. it's just the reality and something we need to keep in mind for retirees today.
you may have earned your benefit, but the person that is now being asked to pay for that benefit is a person who's in their 30's or in their 40's and they're working a job, they are trying to build a family and save for their own future. that's who's paying for your benefits. brian: i remember a figure in your book you say a family of a husband and wife after 65 will collect as much as $1 million apiece in social security money until the end of their life? john: just about. brian: to how many pay in that much? john: the fact is that a typical married couple who reaches age 67 this year will receive in medicare and social security benefits, both combined about $50,000, a little bit more than $50,000 a
year. that is almost equal to the median household income in america today. so over the remainder of their lifetime, their benefits are going to grow with inflation or health care, grow faster than inflation for medicare, and they will receive about $1 million in inflation-adjusted dollars over the remaining lifetime. brian: who attached inflation indicator to social security? john: well, that was done in the most intraordinary circumstance regarding social security that i know of. it was done in 19 2, and the story of it is a very, very interesting one and illustrative of congress' inability to grapple with these entitlement programs. the story began with a proposal to increase social security benefits to compensate recipients for the inflation that had occurred since the last benefit increase. at the time, social security
benefits were not indexed to inflation. congress would regularly increase compensation payments on an ad hoc basis. in the early 1970's, inflation going along. the house proposed a 5% increase. the senate was proposing a 10% increase. we got to the spring of 1972 and there were four democrats that were vying for the nomination of their party for president. lbur mills, george mcgovern, hubert humphrey, and edward muskie. muskie proposed a 15% ncrease. mills threw his hat in the ring with a 20% increase, and followed by mcgovern with a 20% increase. hubert humphrey upped the ante, roposing a 25% increase. eventually congress, the senate started looking for a vehicle
with which they could attach an increase to. then frank church came along and said we can do it 20% increase and put it on the debt ceiling bill. it was a bill is expected to be necessary by july 1. the debt ceiling was to expire on june 30. so the senate in the late evening of june 30 passed its version of the debt ceiling bill with a 20% increase in social security benefits on it. the bill went to the house just before midnight. the house had no other choice and passed the bill. brian: did they raise the tax rate at the same time on social security? john: no. no. in fact, they changed the assumptions about economic growth to, quote-unquote, finance the higher benefits. the increase to the assumed growth rate, bringing more a benefits -- so
in the same bill, they put in a cost-of-living adjustment, a permanent cost-of-living adjustment. they wouldn't be every two years enacting an ad hoc increase. turns out they made a grievous error andinflation, which they overindexed the eventually fixed. but the point is here they were year in year out since the end of world war ii passing benefit increases usually in an election year and usually more than enough to compensate for inflation. and at the end they said, we're going to stop ourselves before we spend again with this automatic -- brian: it seems like you are saying all of these gentlemen are gone. they are dead. they got this opportunity to say, i am going to increase it. they are gone, so when it all falls apart you can blame them, but they are gone. john: that's right.
brian: the 30-year-old today is the one going to pay the price. john: that is exactly right. but i think today's politicians, we have to figure out a way to make sure those politicians begin to feel the heat through younger individuals that are not going to receive what their elders have. brian: how long have you been at the hoover institution? john: i have been there except for my washington service since 1979. brian: where is it located? john stanford, california, stanford university. its goal is a set of ideas that define a free society. brian: where did you go to college? john: to ucla bore for my undergraduate and graduate, a phd in economics. my hometown is in california. brian: you have a family? john: i have a beautiful wife and we have raised six children ogether. brian: how old are the kids?
john: 30's and late 20's. we just had a wonderful event. our youngest was married a month ago, and of the same day we had our first grandchild. two different kids involved here. a very fine day. brian: on that note, let's put the book cover on the screen. it is called "the high cost of good intentions,: a history of u.s. entitlement programs." our guest has been john f. cogan. thank you for joining us. john: thank you very much. appreciate it. [captions copyright national cable satellite corp. 2017] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]
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