Wednesday, February 02, 2005
The Geezer Wars
An interesting piece of analysis in the WaPo. Cyetain has made clear his opposition to Bush's proposed partial privatization of Social Security, and Simon has commented on the "insurance" aspect of the program. I don't pretend to have a grasp of all the numbers or even to understand all the economics behind the different proposals (which I guess are Bush's partial privatization, and the Dems' leave the damn thing alone).
Regarding the idea that we should just leave the program alone, that "proposal" seems to disregard the implications of a notable demographic trend, that we're undeniably getting older as a society (though not as dramatically so as most developed western countries). According to this article, the fiscal implications of our aging society are far greater than mere stress on the Social Security program.
"The question is whether we can support the elderly with a decent standard of living without imposing a crushing burden on the young," said Richard Jackson, director of the global aging initiative at the Center for Strategic & International Studies. "Whether we can is a real concern."
In just 10 years, spending on the elderly will total nearly $1.8 trillion, almost half the federal budget, according to new Brookings Institution and Congressional Budget Office projections. That is up from 29 percent in 1990 and 35 percent in 2000.
The bulk of that growth is spending on the federal government's two largest health care programs, Medicare and Medicaid. Their combined costs are projected to more than double, to a combined total of $1.2 trillion in 2015 from $473 billion last year. Social Security spending is expected to rise to $888 billion from $492 billion in that span.
To straighten out Social Security's financial problems, Bush will probably cut promised benefits for future retirees and divert up to a third of Social Security taxes to private investment accounts. The White House expects the investment gains in those accounts to mitigate -- if not erase -- the cuts in guaranteed benefits.
Bush has offered no plan to slow the sharper growth in federal health care spending beyond his hope that the prescription drug benefit he approved for Medicare will cut down on costly hospitalizations and surgeries.
I understand why people would balk at the notion of changing Social Security, especially when that change includes reduced benefits. But just because we're OK today does not mean we'll be OK tomorrow, and the demographic projections are a global phenomenon, with implications that we can't ignore.
If you don't think private sector investment is a good way to expand the resources necessary to fund retirement and, potentially, healthcare expenditures by the government, what is an alternative that does not impose a crushing (tax) burden on the young?
- posted by Anonymous @ Wednesday, February 02, 2005
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I wish to God that I had the time to provide the detailed, nuanced answer that your question deserves Daniel, and perhaps I will secret myself away for a few hours over the weekend to do so. In the meantime, though let me say this: as you know, the problem with the Bush social security scheme is exactly the same as the problem with his decision to focus the war on terror in Iraq: it’s the wrong solution to the wrong problem.*
The central factor in the coming crisis, uneven population distribution, is one that we can’t do anything about unless we adopt cruel and arbitrary Malthusian population control mechanisms like those adopted by the Chinese. Given this, as you say, the fundamental problem is addressing the health care crisis.
There are a multitude of solutions to this problem, and, though it pains me to say so, almost all of them involve more government activity in some way or other.
The current “health care system” is the perfect antithesis of how markets should work. Put simply: the people who use the product have no incentive to control costs and the people who pay for it have no ability to control costs. Although I once knew the reasoning behind a system that attaches health care coverage to employment, I have long since forgotten it, and can find nothing in the current working of the system that suggests that it makes sense. Our corporations are hobbled by costs that their overseas competitors don’t have to pay. One result among many is artificially low job creation, limiting the return on innovation, shrinking growth and thereby shrinking the tax base. Meanwhile, the systems set up for those who don’t get their health care coverage from their employers increasingly perfect models of inefficiency.
The real crisis in these programs is not at the federal but at the state level. The reason for this is simple: the Bush tax cuts. These cuts at the federal level have simply driven the burden downwards.** Type the words “Medicaid crisis” into Google. The list of states that either have cut, or are considering cutting, benefits severely include Maine, Tennessee, Utah, Mississippi, New York, Colorado, any many others.*** The result, in many cases, is that preventative and holistic care regimes are thrown-over in favor of last minute crisis response which is more costly in terms of dollars and social costs.
The long term solution to the health care crisis, and therefore the elder crisis, is a single payer system. Let’s compare this at a very superficial level with the current system. In a single payer system, the individual using the product still lacks the proper incentives to manage costs. However, the “person” who is covering the cost now has tremendous leverage to manage them himself. We need to look no further than the efficiency of the federal Medicare program to see what kind of results that we could expect. Year after year Medicare maintains an astoundingly low operational overhead of 2%. The HMOs, on the other hand are lucky if the can keep below 30%. I hope to write more about this in the near future.
Until the American people are willing to have an honest discussion about this problem, nothing will be done about it.
_______________________________
*The bottom line on social security is that, as is pointed out in this week’s Business Week magazine (hardly a liberal publication) the simple cure to the Social Security problem is to return federal taxes on the top 2% of earners to the level they were at before the Bush tax cuts. That isn’t ignoring the problem, its an actual solution to a problem that barely even warrants discussion.
** The 400 pound gorilla in the room is that Bush’s tax cuts at the federal level don’t just result in decreased benefits they in fact simply shift the burden of collecting taxes to less efficient state and local mechanisms, resulting in an increased total tax burden for hundreds of thousands of Americans since Bush took office. This is why the Republican controlled legislature in Virginia has recently voted to raise taxes and it is also the reason why property and sales taxes are exploding all over the country.
***The stupidest approach to “reform” yet was the one overseen by Michael Leavitt when he was governor of Utah. Leavitt received a waiver from the federal government to mold his state’s benefits to meet “facts on the ground.” His approach: cover more people by reducing benefits of existing enrollees and offering absurdly subpar benefits to a whole batch of new enrollees – including no hospital benefit, arbitrary limits on prescription benefits, no mental health benefit, and more. The Bush administration has called this approach a success, while the medical community has uniformly recognized it for the failure that it is. For his efforts, Leavitt has been promoted to Secretary of HHS.
The central factor in the coming crisis, uneven population distribution, is one that we can’t do anything about unless we adopt cruel and arbitrary Malthusian population control mechanisms like those adopted by the Chinese. Given this, as you say, the fundamental problem is addressing the health care crisis.
There are a multitude of solutions to this problem, and, though it pains me to say so, almost all of them involve more government activity in some way or other.
The current “health care system” is the perfect antithesis of how markets should work. Put simply: the people who use the product have no incentive to control costs and the people who pay for it have no ability to control costs. Although I once knew the reasoning behind a system that attaches health care coverage to employment, I have long since forgotten it, and can find nothing in the current working of the system that suggests that it makes sense. Our corporations are hobbled by costs that their overseas competitors don’t have to pay. One result among many is artificially low job creation, limiting the return on innovation, shrinking growth and thereby shrinking the tax base. Meanwhile, the systems set up for those who don’t get their health care coverage from their employers increasingly perfect models of inefficiency.
The real crisis in these programs is not at the federal but at the state level. The reason for this is simple: the Bush tax cuts. These cuts at the federal level have simply driven the burden downwards.** Type the words “Medicaid crisis” into Google. The list of states that either have cut, or are considering cutting, benefits severely include Maine, Tennessee, Utah, Mississippi, New York, Colorado, any many others.*** The result, in many cases, is that preventative and holistic care regimes are thrown-over in favor of last minute crisis response which is more costly in terms of dollars and social costs.
The long term solution to the health care crisis, and therefore the elder crisis, is a single payer system. Let’s compare this at a very superficial level with the current system. In a single payer system, the individual using the product still lacks the proper incentives to manage costs. However, the “person” who is covering the cost now has tremendous leverage to manage them himself. We need to look no further than the efficiency of the federal Medicare program to see what kind of results that we could expect. Year after year Medicare maintains an astoundingly low operational overhead of 2%. The HMOs, on the other hand are lucky if the can keep below 30%. I hope to write more about this in the near future.
Until the American people are willing to have an honest discussion about this problem, nothing will be done about it.
_______________________________
*The bottom line on social security is that, as is pointed out in this week’s Business Week magazine (hardly a liberal publication) the simple cure to the Social Security problem is to return federal taxes on the top 2% of earners to the level they were at before the Bush tax cuts. That isn’t ignoring the problem, its an actual solution to a problem that barely even warrants discussion.
** The 400 pound gorilla in the room is that Bush’s tax cuts at the federal level don’t just result in decreased benefits they in fact simply shift the burden of collecting taxes to less efficient state and local mechanisms, resulting in an increased total tax burden for hundreds of thousands of Americans since Bush took office. This is why the Republican controlled legislature in Virginia has recently voted to raise taxes and it is also the reason why property and sales taxes are exploding all over the country.
***The stupidest approach to “reform” yet was the one overseen by Michael Leavitt when he was governor of Utah. Leavitt received a waiver from the federal government to mold his state’s benefits to meet “facts on the ground.” His approach: cover more people by reducing benefits of existing enrollees and offering absurdly subpar benefits to a whole batch of new enrollees – including no hospital benefit, arbitrary limits on prescription benefits, no mental health benefit, and more. The Bush administration has called this approach a success, while the medical community has uniformly recognized it for the failure that it is. For his efforts, Leavitt has been promoted to Secretary of HHS.
Let us call a spade a spade. Bush's social security plan, like his medical savings accounts, is not a plan to shift responsibility to individuals, as you characterize it, it is a plan to shift risk to individuals.
If he were telling the truth he would say what his puppetmasters as AEI and the Club for Growth say openly all the time: its not fair for government to take assets away from "productive" citizens in order to make up for the shortcomings of those who can't or won't take care of themselves.
There is some reason in this arguement, and we could have a real national discusion around it, but that isn't what Bush has set us up for.
I would be very surprised Dani, if you really believe that the administration's long term goal is not the total dismanteling of the safety net.
The bottom line here is that those who have the most need for the safety net are the least equiped to manage their own accounts. Sarge would label this as the worst kind of liberal patranization, and he might be right, but it doesn't make it any less true.
Sarge and I, and maybe you, already manage assets, we have pensions, real estate, mutual funds, 401ks, etc. I have no doubt that I will benefit from privitazation.
The question boils down to this: how much of other people's suffering are we willing to live with?
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If he were telling the truth he would say what his puppetmasters as AEI and the Club for Growth say openly all the time: its not fair for government to take assets away from "productive" citizens in order to make up for the shortcomings of those who can't or won't take care of themselves.
There is some reason in this arguement, and we could have a real national discusion around it, but that isn't what Bush has set us up for.
I would be very surprised Dani, if you really believe that the administration's long term goal is not the total dismanteling of the safety net.
The bottom line here is that those who have the most need for the safety net are the least equiped to manage their own accounts. Sarge would label this as the worst kind of liberal patranization, and he might be right, but it doesn't make it any less true.
Sarge and I, and maybe you, already manage assets, we have pensions, real estate, mutual funds, 401ks, etc. I have no doubt that I will benefit from privitazation.
The question boils down to this: how much of other people's suffering are we willing to live with?
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