I’m fair weather fan of center-left economist/ domestic policy “wonks” Paul Krugman and Ezra Klein (who I suspect is his long lost son). They are both excellent at pointing out fundamental flaws in mainstream press’ coverage of economics and some of the more complicated domestic policy issues that arise. However, both have recently downplayed the problems with our entitlement programs. In their debunking of wild claims by critics who find their way onto major news outlets they have managed to make the very huge problems with entitlements seem meager. While the math and technical points are largely correct, both ought to consider the problems we face differently.
It has long been known that our entitlement programs will be insolvent because of structural issues within the program itself. Republicans and Democrats alike now fully acknowledge that these programs are unsustainable and the longer nothing substantial is done the worse the problems will get.
Projected long-run program costs for both Medicare and Social Security are not sustainable under currently scheduled financing, and will require legislative corrections if disruptive consequences for beneficiaries and taxpayers are to be avoided.
The financial challenges facing Social Security and Medicare should be addressed soon. If action is taken sooner rather than later, more options and more time will be available to phase in changes so that those affected can adequately prepare.
-2011 Social Security and Medicare Boards of Trustees
Social Security is currently running a deficit. Some have wrongly stated this as the central problem, when it is only a component of the larger picture. Krugman rightly points out that Social Security has a rather large trust fund, which the program can eat away at for a while. Taken with the interest gained from the fund, we have until 2036 when “trust fund reserves are exhausted.” You can probably read a different number from different people in difference places, but this is straight from the trustee report.
Responding to claims made by GOP 2012 candidates, Mr. Klein tries to put the shortfall of Social Security into context by showing the deficit relative to GDP. While his are right, his point does not defuse the fact that these programs are broken and the too often cited “solutions” to make Social Security are not solutions at all. But he knows this. He said it himself.
It’s underfunded, ill-designed for certain features and facts of the modern world, and — probably most important — overused. Beyond Social Security, America’s retirement system is, in general, patchy and insufficient, which leaves retirees too reliant on Social Security. They then learn the hard way that the program is not what they’d hoped. We should do better. And we can.
Klein also made a post about Social Security that admitted that it is “stingy and getting stingier” and that we ought not to “‘solve’ the Social Security problem” by approaching it as a budgetary question. Yet, that’s exactly what he and Krugman do when they provide a list of tax raises and benefit cuts that are precisely tailored to the addressing the estimated deficiency, or when they try to make the program’s problems look manageable by comparing it to GDP. The relative comparison provides what is certainly is a low number and most people probably cannot conceptualize the meaning of an estimated .7% of GDP shortfall over 75 years. (It translates into $106,390,200,000 or $106.3902 billion. For context, all of Massachusetts runs off of roughly $34 billion each year.) That is, of course, if you choose to believe an estimate like that will at all reflect reality.
But the volume of our Social Security problems pail in comparison with the problems of Medicare and Medicaid. These programs’ sheer size and direct involvement with our healthcare industry makes leaves no question as to the connection between rising costs in prescription drug and medical costs and our entitlement programs. Obamacare was an attempt to resolve some of many problems with the government’s hand in health care, but I am unconvinced that it was as much as a game changer as was purported.
I think it is time we all get on the same page about the severity of these problems. Because of our entitlement programs the single largest part of our budget is structurally unsound, unsustainable and has not been changed to meet the challenges of the modern world. The huge lists of small fixes are laughable. The whole notion of continuing to reduce already problematically low benefits is just ridiculous and they are based on estimates that will likely be wrong. The program already does not provide real security to those retiring. If it did, we would not have “do not rely on Social Security” as the first and last point made by retirement advisors across the country. Already, benefits are too low and they are getting even worse. Klein is right – Social Security is ill-designed for the modern world. The entirety of our entitlement programming needs to be reconsidered and redesigned to meet the needs that we have today. It is time to let go of the brands of “Social Security,” “Medicare,” and “Medicaid.” We need a new approach to social welfare. A new program ought to respect market efficiency at all times and set strict (some might say ‘draconian’) guidelines as to what is covered so Republicans know tax dollars are not going to waste. It should be means tested and the taxes that support it should be progressive.
The political reality is that this will not happen. Our government will continue to sputter along until a moment of real crisis, or we will get by on small tweaks or moderate changes that dont replace the most problematic parts of the system (like Obamacare). Rather than blame it on Republican obstructionism or Democrats being socialists I think that this is a simply a good lesson in big democratic government really works. The inertia of our current system makes the implementation of the changes that should have been implemented 10 years ago, and desperately need to be implemented now, a pipe dream. The bigger the government, the bigger the problems and the harder they are to solve.