Jon Chait on "entitlement hysteria"

The New Republic's Jon Chait skewers the Washington pundits whose obsession with the fiscal status of Social Security defies reason:

Those afflicted with entitlement hysteria are identifiable not by the realization that big social programs will need a fix--which is widely understood-- but by the urgency and gravity of their pleas. Entitlement hysterics' favorite statistic is the retiree-worker ratio. In 1950, they will explain in somber tones, there were 18 workers for every retiree. But, by 2030, there will be barely more than two. Absent reform, they warn, we will all be wage slaves, toiling away as our languid baby-boom masters while away their declining years on cruise ships and RVs.

There's some truth to their analysis, but it misses the point in a crucial way. The two largest entitlement programs, Social Security and Medicare, are in very different shape. The Social Security Trust Fund is scheduled to last until 2042, at which point we'll have to hike up taxes or trim spending a bit. Medicare, on the other hand, faces a day of reckoning in 2019.

Yet one of the oddities of the entitlement hysterics is that they are far more obsessed with the minor problems of Social Security than with the massive problems of Medicare. Indeed, if you look closely at their dire proclamations, they inevitably follow the same pattern: They begin with an ominous summation about entitlements--thus lumping together Medicare with Social Security--then swiftly proceed to demand that Social Security be shored up forthwith.

...Since you can't solve the entitlement problem without solving the health care problem, one might think that the entitlement hysterics would have gradually moved on to becoming health care hysterics... Yet this is another puzzling thing about entitlement hysteria: the sheer persistence of the obsession. It's true we have some large federal programs that are going to have to be shored up. But why do they consider this to be a matter of such unique urgency?

How many Washington pundits understand that the entitlement problem is largely a Medicare problem? Five percent?

What's actually going on is that the pundits now use a willingness to reform Social Security as a test of seriousness, as Chait points out:

Ten or 20 years ago, you could plausibly deem Social Security's finances among the most pressing national problems. Those who were willing to take on the problem were admired for their farsightedness, bipartisanship, and seriousness of purpose. Social Security's place on our list of national problems has long since been overtaken, but, among Washington establishment types who remember those days, the issue retains its totemic significance. Entitlement hysteria has become less a response to a crisis than an expression of statesmanship.

Can somebody get this article to David Broder?

Comments

[David]

Speaking as an actuary, I will agree with Brendan that Medicare is in worse shape than SS. In addition to the timing of when the trust fund is exhausted, it's a lot easier to fix SS. A combination of increased retirement age, reduced benefits and/or reduced inflation adjustment will do the trick. Fixing Medicare is harder conceptually. We can hardly exclude treatments that are now covered, and the age 65 has been a fixed point.

But, I disagree with the analysis of SS in two ways:

1. The Trust Fund isn't supposed to go to zero. The SS Actuarial definition is that SS solvency means that the Trust Fund will be adequate for 75 years. By that official definition, SS is currently insolvent.

2. It's not entirely true that "The Social Security Trust Fund is scheduled to last until 2042, at which point we'll have to hike up taxes or trim spending a bit." The year 2042 is correct, but not the other part of the sentence.

Due to an accounting change during Reagan's administration (of which I disapprove) excess funds going into SS have been counted as offsetting the budget deficit. That is, SS is currently collecting more money than it pays out. That difference is counted as income to the federal budget. (It's true that the excess funds go to the federal budget, but there is an offsetting debt that the federal budget owes to the SS system. That's why I disapprove of counting that money as income to the federal budget.)

We are already at a point where we have to hike up taxes or trim spending a bit (or report a bigger deficit.) Why? Because, even though SS is producing a surplus, the size of the surplus is decreasing. So, the 2007 budget gets less relief from SS than 2006 did, and 2008 will get less relief still.

Thus, the impact of SS on the budget deficit is already occurring. It will continue to grow indefinitely until or unless the plan is reformed.

[KevinM]

I agree with the actuary.

I have a financial problem when my last dollar is spent. Knowing I won't spend the last dollar for a few years is not comforting unless I am also aware of a new stream of income within that span.

[Another David]

I question the assumptions that the SSA is working off of, most notably the projections of life expectancy. How accurately has the SSA forecast increases in longevity?

[JLG]

We 'found' trillions of dollars for 2 elective wars and for a wall street bailout - surely, if these problems with S.S. exist, the government can find the money necessary to supplement the program.