Monday, May 18, 2009

No need to hide

So the trustees of the Social Security fund came out with their report. Not surprisingly since it involves economic projections made in the course of a deep recession, it projects that Social Security will start running a deficit in 2016, one year earlier than previously predicted, and the built-up surplus will be gone in 2037, four years earlier than before. Medicare is already running a deficit and the surplus will be gone by 2017 - two years sooner than last year's prediction.

Even though the report offered no reason to panic, the Washington Post, as is its wont with anything to do with Social Security, fear-mongered it; it's front-page story referred to "raising the alarm" and said the report "ratchets up pressure on the Obama administration and Congress to stabilize the retirement system." And on the editorial page, it said with bug-eyed breathlessness that
the programs are in trouble. ... The U.S. population is aging, health-care costs are spiraling upward and neither program has the money to cover promised benefits.
The editors dismissed out of hand the arguments of those who refuse to be stampeded and (perhaps unintentionally) revealed the true agenda when it insisted that "cost control has to be at the center of any plan" while continuing to refer to such code words for "cut benefits" as "reform." The only thing it lacked was the appeal to the "sacrifices that we will all have to make," the word "all," in this case, meaning "all of you."

As Robert Reich pointed out,
[r]eports of these two funds' demise are not new. Fifteen years ago ... both funds were supposedly in trouble. But as I learned, the timing and magnitude of the trouble depended a great deal on what assumptions the actuary used in his models.
That analysis assumed the economy would grow an average of 2.6% a year over the next 75 years. But average annual growth over the past 150 years has been closer to 3% per year. Use that figure and the system is flush. Now, it does make sense to make, you'll pardon the expression, conservative assumptions about future growth, the better to insure the long-term stability of the system. What does not make sense is to use conservative assumptions and then run around like Chicken Little yelling about imminent disaster. But that is what's happening.
Even if you assume Social Security is a problem[, Reich adds], it's not a big problem. Raise the ceiling slightly on yearly wages subject to Social Security payroll taxes (now a bit over $100,000), and the problem vanishes.... Social Security would also be in safe shape if it were slightly more means tested, or if the retirement age were raised just a bit. The main point is that Social Security is a tiny problem, as these things go.
I would endorse raising the ceiling on wages subject to SS payroll taxes (in fact, I'd eliminate it altogether) and I'd be strongly opposed to raising the retirement age further - but Reich's valid point remains that Social Security needs tweaking at most.

Bob Weiner, former chief of staff for the House Committee on Aging, reminded viewers of CNN of the value of Social Security, something too often forgotten in the heat of budget battles.
[It] has been the most successful one in the history of American social programs - taking half of senior citizens out of poverty. Half of seniors rely on Social Security for 90% of their income.
He noted pointedly that
one third of the cost of the Iraq war or one third of the tax cuts; even then in the worst case scenario would solve [any funding problems]
and that even under that worst case scenario, the system will be able to pay 75% of projected benefits even after it's "depleted" or "broke" or "bankrupt" or whatever scare word the reactionaries want to apply to it.

There is also a very important but often-overlooked point here: Again, that is 75% of projected benefits. Initial SS benefits rise over time with wage inflation, which, happily, tends to rise faster than price inflation. Put another way, over time, initial SS benefits tend to rise in real terms, provide an improved standard of living for new retirees. That 75% of projected benefits, depending on what assumptions you make about price inflation between now and 2037, could actually provide a higher standard of living for new retirees in 2037 than now.

However, there is still the other side of the issue: Medicare. Weiner says it's "in dire straits" and Reich calls it "a monster." And there is no question but that it needs to be addressed and soon. But the problems with Medicare, ultimately, are not about Medicare - they are about sharply rising health care costs, rising at a rate that far outstrips overall inflation. Weiner suggests some simple fixes ("allowing imports," I assume of prescription drugs, and "vying and buying," which I assume means using the buying clout of the federal government to better negotiate prices, particularly for drugs) which would help short term but which he knows are no solution. The way to fix Medicare is to fix the damn health care system.

And I damn well don't mean the apparently bogus offer by the medical industry to cut costs by $2 trillion over the next 10 years. I mean real, thorough-going change. Hopefully, over the next few days I will get it together enough to explain in more detail just what I mean by that. In any event, the basic fact remains: Fixing Medicare requires fixing the health care system and fixing the health care system will fix Medicare.

Footnote: As an indication of how eager they were to push the fear button, the WaPo editorial also said that
the size of the Social Security surpluses has shrunk, posing a problem for the government since it relies on these funds to help plug its deficits. Over the next seven years, the cumulative surpluses will be $157 billion instead of the previously estimated $454 billion, forcing the cash-strapped feds to borrow even more than they had expected.
Now, it's true that the feds have been using the trust fund as a piggy bank, borrowing from it to help cover deficits and if the amount in the trust fund is lower than expected, that part of the deficit will have to be financed elsewhere at perhaps greater cost. However, that doesn't have one single blessed little thing to do with the future or soundness of Social Security. It is a complete and total irrelevancy, thrown in, in a kitchen sink approach, to stampede people into supporting benefit cuts - cuts which, as I noted last time, would have to be immediate cuts in benefits to current retirees to have a real impact on the deficit.

It would appear that's that the WaPo wants.

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