Obama Calls for Entitlement Reform – But Curing Health Care Costs Overall Comes First

By Fred Lucas | April 14, 2009 | 7:50 PM EDT

President Barack Obama (AP Photo)

Washington (CNSNews.com) - President Barack Obama called for entitlement reform as the only way to attain fiscal stability among rising debt and deficits, in a speech at Georgetown University on Tuesday. But as a caveat, he said health care reform across the board must come first.

“This structural gap in our budget, between the amount of money coming in and the amount going out, will only get worse as baby boomers age, and will in fact lead us down an unsustainable path,” Obama said to the crowd of about 200 people mostly college students, in a sweeping talk about the economy and his administration’s plans to help the country out of the recession.
 
“Along with defense and interest on the national debt, the biggest costs in our budget are entitlement programs like Medicare, Medicaid, and Social Security that get more and more expensive every year,” Obama said. “So if we want to get serious about fiscal discipline – and I do – then we are going to not only have to trim waste out of our discretionary budget, a process we have already begun – but we will also have to get serious about entitlement reform.” 
 
According to the non-partisan Government Accountability Office, the federal government faces a $53-trillion shortfall to cover the costs of promised benefits in its entitlement programs. Simply, despite the revenue the government currently gets through taxes, it still needs $53 trillion to cover all the people and obligations promised under Medicare, Medicaid, Social Security, the Veterans Administration, and some other smaller programs.
 
Obama said he expects Congress will deliver a health care reform bill for his signature this year.
 
“Nothing will be more important to this goal than passing health care reform that brings down costs across the system, including in Medicare and Medicaid.  Make no mistake: health care reform is entitlement reform,” Obama said. “Once we tackle rising health care costs, we must also work to put Social Security on firmer footing.”
 
“It is time for both parties to come together and find a way to keep the promise of a sound retirement for future generations,” said the president. “And we should restore a sense of fairness and balance to our tax code by shutting down corporate loopholes and ensuring that everyone pays what they owe.” 

On other matters, Obama said he had some disagreements with the increasingly unpopular $700-billion bailout for the financial industry, but supported the concept while calling for changes. He added that he would not nationalize the banks.
 
In anther policy statement, he declared that by 2020 the United States will lead the world in the percentage of college graduates, prompting thunderous cheers from the audience. Gaining even more applause from the college crowd was his pledge to impose a carbon cap-and-trade system.
 
A cap-and-trade program essentially creates a tax where none exists. Industries would be forced to pay for every ton of emissions they release – and those who pollute more could purchase “carbon credits” from businesses that pollute less.
 
Obama says such a program will give Americans incentives “to use their ingenuity to develop economically effective solutions to climate change.” But businesses warn the higher costs would be passed on to consumers.

Speaking for about 45 minutes, the president seemed to keep his eyes fixed on the teleprompter screens to his left and right but still deviated slightly from the prepared text.

Regarding health care costs, Obama already succeeded in signing the $787-billion stimulus package that includes more than $1 billion to digitize medical records on a centrally linked system for every American by 2014 and establish a comparative effectiveness council to determine what treatments are most effective, both cost-wise and health-wise.

The Obama administration has also already promoted its health reform plan, which would allow people to choose between employer-based health insurance and government-run plans, currently limited to federal workers.
 
Health reform has been a long-stated goal for Obama, going back to his campaign. But the president has rarely mentioned entitlement reform, save for a statement before he was inaugurated. Typically, politicians who have supported entitlement reform have been Republicans. 
 
Former President George W. Bush presented a plan to Congress to improve the long-term solvency of the Social Security program that would offer current workers the option of investing in private accounts while not affecting current retirees. The issue was so touchy in 2005 even the Republican-controlled Congress shunned it.

Obama offered no specifics on how he would reform entitlements other than to say that controlling health care costs was the first step.
 
Without specifics, it is easy to be skeptical of pledges to reform entitlement programs, said Robert Moffit, director of health care policy studies at the conservative Heritage Foundation. Also, Obama signed legislation to expand children’s health insurance – initially only for poor families – to middle class families, which itself created a new entitlement, Moffit said.
 
But, Moffit said, the president is right to say that entitlement reform and health care costs cannot be separated.
 
“If you mean the financial crisis in public programs, yes. Medicare and Medicaid make up the bulk of the entitlement crisis,” Moffit told CNSNews.com. “Social Security is relatively minor. But you can’t bend the curve on health care spending by adding between $634 billion and $1 trillion to the system.”
 
Obama told the Georgetown audience that the economy is beginning to turn around with schools and police departments laying off fewer and fewer workers, clean energy and construction companies rehiring workers and more credit available to small businesses.
 
“There is no doubt that times are still tough -- by no means are we out of the woods just yet,” he said. “But from where we stand, for the very first time, we are beginning to see glimmers of hope.”

Addressing critics who say his plans spend too much, Obama quoted the Sermon on the Mount to state why spending is needed now to build a better foundation for the tattered economy.

“There is a parable at the end of the Sermon on the Mount that tells the story of two men.  The first built his house on a pile of sand, and it was destroyed as soon as the storm hit,” Obama said. “But the second is known as the wise man, for when ‘the rain descended, and the floods came, and the winds blew, and beat upon that house … it fell not:  for it was founded upon a rock.’”
 
“We cannot rebuild this economy on the same pile of sand,” said Obama. “We must build our house upon a rock.  We must lay a new foundation for growth and prosperity – a foundation that will move us from an era of borrow and spend to one where we save and invest; where we consume less at home and send more exports abroad.”
 
Obama defended the $700-billion Troubled Assets Relief Program but pledged to increase accountability of recipients.
 
“Although there are a lot of Americans who understandably think that government money would be better spent going directly to families and businesses instead of banks – ‘Where’s our bailout?,’ they ask,” said Obama,  “The truth is that $1 of capital in a bank can actually result in $8 or $10 of loans to families and businesses, a multiplier effect that can ultimately lead to a faster pace of economic growth.”
 

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