The Truth About Entitlements
When conservative politicians and commentators talk about entitlement programs (particularly the big two: Social Security and Medicare), they frequently use words like "unsustainable" and "outdated." We're often told that these New Deal/Great Society programs are being threatened by America's changing demographics, that as baby boomers retire, we'll no longer be able to afford such programs. The solution, we're told, is to scale back, privatize, and introduce market-based solutions. Conservatives pat themselves on the back for being willing to face up to these problems and for proposing new and innovative solutions. Liberals are chastised for refusing to confront the problems and for failing to offer "new" solutions.
The truth is that we do have some important problems to face in the years ahead, but they're not the ones that conservatives are talking about, and it's not for the reasons they state either.
Let's start with Social Security. Small-government types have always hated Social Security, viewing it as nothing but naked socialism. But they long ago realized that the program is far too popular for a direct political assault. So instead, conservative think tanks set about the task of convincing people that Social Security is doomed to go bankrupt, that young people will never see a dime of their money. There is no truth to this idea, as I will explain shortly, but it has nevertheless managed to seep into the collective consciousness of younger Americans. In his quest to privatize Social Security, President Bush never fails to remind his carefully screened town hall crowds that unless we act now, Social Security will go "flat broke" and they "won't see a dime."
Thanks to considerable pushback by Democrats and liberal commentators, people are starting to realize just how bogus these claims are. The fact is that even the gloomiest projections show that the Social Security program will be able to pay full promised benefits until the early 2040s. Even at that point, the program will still be able to pay at least 70% of promised benefits. And since benefits rise faster than projected inflation, 70% of benefits in 2040 is better than 100% of benefits today. In other words, if we do nothing, benefits will still be higher than they are today. Some crisis. It's also important to note that these projections assume very low rates of economic growth over the next 40 years. If the economy grows in the next 40 years at the rate it grew over the last 40 years, there will be no shortfall at all. But let's assume that the projections hold true; how can we make up the shortfall? Isn't it an enormous amount? Not really. To put it in perspective, the entire projected shortfall could be paid for by repealing 1/4 of the Bush tax cuts. But, of course, that possibility isn't even on the table. Instead, we're offered a half-baked privatization plan that would do nothing to address the shortfall, would rack up trillions of dollars in transition costs, and would subject what is supposed to be a social insurance program to individualized market risk. The fact is, there is nothing wrong with the Social Security program. Indeed, it is one of the most successful government programs of all time, having virtually eliminated the problem of elderly poverty in America. Depending on future economic growth, the program may well encounter a shortfall decades down the road, but it is nothing that cannot be remedied by a modest tax increase or modest benefit cuts (preferably a responsible mix of two).
The real problem we face is with the Medicare program, which currently has a projected shortfall that dwarfs that of Social Security. But contrary to conservative claims, the rising pricetag of Medicare has little to with it's single-payer structure, or government waste, or even the aging of the population. Rather, Medicare costs are rising because health care costs themselves are rising. And again contrary to conservative claims, medical malpractice suits are not the reason health care costs are rising (though I am in favor of tort reform for other reasons). Health care costs are rising primarily due to the development of new, expensive medical technologies.
So is Medicare unsustainable? Well, that very much depends on what you mean by that term. First, there are ways to contain costs. One way is to reduce overhead by providing a universal health care system. It's estimated that as much as 20% of health care costs are administrative overhead generated by having to deal with insurance companies. We pay far more for health care in America than any other country, and without demonstrably better results. Moreover, any system that provided access to earlier, preventitive care would greatly reduce the strain on Medicare. The uninsured in this country present in emergency rooms with conditions that are expensive to treat and could easily have been prevented. Many are forced to wait till they qualify for Medicare to treat their chronic conditions. Besides being unjust, this makes no sense from a cost-containment standpoint. There are numerous other ways in which costs could be contained by making long overdue reforms to our overall health care system.
But even if costs continue to rise, does it make sense to say the Medicare is unsustainable? I think not. Health care is not like other services. It is not an optional expense. It is something that we all must pay for, one way or another; it's literally a matter of life and death. Whatever these services cost, we as a society will pay them; the question is simply whether we will pay for them collectively through taxes or individually out of our own pockets. Because health care needs are so unevenly distributed, it is far more efficient and fair to pay for the costs of such care collectively. If the development of medical technology continues to cause rising costs, why is it so unthinkable to cover these costs through increased taxation? Could there be any better use of taxpayer money than treating sickness and prolonging life? The notion that Medicare is "unsustainable," therefore, only makes sense if you have already ruled out all potential tax increases. I think if you asked most people, though, they'd tell you that a program as important as Medicare is worth a tax increase, if, at the end of the day, that's the only way to sustain it.
That's enough policy talk for one night.
The truth is that we do have some important problems to face in the years ahead, but they're not the ones that conservatives are talking about, and it's not for the reasons they state either.
Let's start with Social Security. Small-government types have always hated Social Security, viewing it as nothing but naked socialism. But they long ago realized that the program is far too popular for a direct political assault. So instead, conservative think tanks set about the task of convincing people that Social Security is doomed to go bankrupt, that young people will never see a dime of their money. There is no truth to this idea, as I will explain shortly, but it has nevertheless managed to seep into the collective consciousness of younger Americans. In his quest to privatize Social Security, President Bush never fails to remind his carefully screened town hall crowds that unless we act now, Social Security will go "flat broke" and they "won't see a dime."
Thanks to considerable pushback by Democrats and liberal commentators, people are starting to realize just how bogus these claims are. The fact is that even the gloomiest projections show that the Social Security program will be able to pay full promised benefits until the early 2040s. Even at that point, the program will still be able to pay at least 70% of promised benefits. And since benefits rise faster than projected inflation, 70% of benefits in 2040 is better than 100% of benefits today. In other words, if we do nothing, benefits will still be higher than they are today. Some crisis. It's also important to note that these projections assume very low rates of economic growth over the next 40 years. If the economy grows in the next 40 years at the rate it grew over the last 40 years, there will be no shortfall at all. But let's assume that the projections hold true; how can we make up the shortfall? Isn't it an enormous amount? Not really. To put it in perspective, the entire projected shortfall could be paid for by repealing 1/4 of the Bush tax cuts. But, of course, that possibility isn't even on the table. Instead, we're offered a half-baked privatization plan that would do nothing to address the shortfall, would rack up trillions of dollars in transition costs, and would subject what is supposed to be a social insurance program to individualized market risk. The fact is, there is nothing wrong with the Social Security program. Indeed, it is one of the most successful government programs of all time, having virtually eliminated the problem of elderly poverty in America. Depending on future economic growth, the program may well encounter a shortfall decades down the road, but it is nothing that cannot be remedied by a modest tax increase or modest benefit cuts (preferably a responsible mix of two).
The real problem we face is with the Medicare program, which currently has a projected shortfall that dwarfs that of Social Security. But contrary to conservative claims, the rising pricetag of Medicare has little to with it's single-payer structure, or government waste, or even the aging of the population. Rather, Medicare costs are rising because health care costs themselves are rising. And again contrary to conservative claims, medical malpractice suits are not the reason health care costs are rising (though I am in favor of tort reform for other reasons). Health care costs are rising primarily due to the development of new, expensive medical technologies.
So is Medicare unsustainable? Well, that very much depends on what you mean by that term. First, there are ways to contain costs. One way is to reduce overhead by providing a universal health care system. It's estimated that as much as 20% of health care costs are administrative overhead generated by having to deal with insurance companies. We pay far more for health care in America than any other country, and without demonstrably better results. Moreover, any system that provided access to earlier, preventitive care would greatly reduce the strain on Medicare. The uninsured in this country present in emergency rooms with conditions that are expensive to treat and could easily have been prevented. Many are forced to wait till they qualify for Medicare to treat their chronic conditions. Besides being unjust, this makes no sense from a cost-containment standpoint. There are numerous other ways in which costs could be contained by making long overdue reforms to our overall health care system.
But even if costs continue to rise, does it make sense to say the Medicare is unsustainable? I think not. Health care is not like other services. It is not an optional expense. It is something that we all must pay for, one way or another; it's literally a matter of life and death. Whatever these services cost, we as a society will pay them; the question is simply whether we will pay for them collectively through taxes or individually out of our own pockets. Because health care needs are so unevenly distributed, it is far more efficient and fair to pay for the costs of such care collectively. If the development of medical technology continues to cause rising costs, why is it so unthinkable to cover these costs through increased taxation? Could there be any better use of taxpayer money than treating sickness and prolonging life? The notion that Medicare is "unsustainable," therefore, only makes sense if you have already ruled out all potential tax increases. I think if you asked most people, though, they'd tell you that a program as important as Medicare is worth a tax increase, if, at the end of the day, that's the only way to sustain it.
That's enough policy talk for one night.
posted by A.L. at 11:44 PM
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