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Home Publications Blogs Beat the Press Charles Lane Wants to Cut Social Security and Medicare

Charles Lane Wants to Cut Social Security and Medicare

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Thursday, 31 July 2014 07:18

Yes, what else is new? The immediate topic is Gene Steuerle's new book, Dead Men Ruling (reviewed here). The basic story, taken from the book, is that commitments made in the past, specifically Social Security, Medicare, Medicaid and interest on the debt, are taking up an ever larger share of the budget. This means that in the decades ahead people will have little say in how their tax dollars are spent, since they have already been committed by prior generations of "dead men."

There are several problems with this story. First, categories of spending are not the only way in which past generations obligate future generations. Military actions and tough on crime laws also impose large burdens on future taxpayers. For example, when the U.S. went to war in Iraq it not only committed itself to many decades of payments to veterans, included many who were wounded or disabled, but it also implied future commitments to the region. While the country may be able to back out of these commitments, politicians will often be reluctant to do so. 

In the same vein, tough on crime measures, such as three strikes laws, can mean that we will have to support a large prison population for decades into the future. (It can also mean that people spend their life in jail for petty offenses.) There is little obvious basis for highlighting the spending committed by social programs while ignoring spending committed by military actions and harsh criminal penalties.

A second problem with the logic here is it implicitly assumes that the revenue is available independent of the spending. This is almost certainly not true, especially in the case of Social Security. Under the law, Social Security taxes can only be used for Social Security spending. There is also reason to believe that people view Social Security taxes as different from other taxes. The National Academy for Social Insurance recently did a poll which found that a majority of people would be willing to pay higher taxes if it was necessary to avoid a benefit cut. The fact that taxes and spending are linked both in law and the public's mind means it is misleading to include Social Security revenue in the denominator of money available to spend. It isn't. (This would be explicit if we privatized Social Security.) This means that the amount of taxes that are actually up for grabs is much less than Lane-Steuerle say, and the portion committed by dead men for social insurance is considerably less.

This brings us to the other side of the ledger, Medicare and Medicaid. We spend more than twice as much per person for our health care as people in other wealthy countries. This should not be something we take for granted for all future time. After all, our political leaders are not that much more corrupt and incompetent than those in other countries.

If we paid the same amount for health care as people in other countries it would free up large amounts of revenue. However this would mean going after our doctors, the drug companies, and the medical equipment manufacturers, all of whom pocket close to twice as much as their counterparts in Europe and Canada. Of course this means going after powerful interest groups. That is not a popular position in Washington and certainly not at the Washington Post. (It should be noted that the Post gets large amounts of advertising revenue from drug companies.)

So the real question raised here is whether we look to cut benefits for seniors or whether we look to cut waste from the health care system. We know where Charles Lane and Post stand.

 

Addendum: I should also mention that patent monopolies also should be listed among the commitments made by dead men. In effect, a patent monopoly is a privately collected tax, where we allow patent holders to charge prices far above the free market price, but threatening competition with jail. Anyone looking at ways in which the government commits the resources of future generations should certainly count these obligations. For prescription drugs alone the excess price is around 2 percent of GDP (10 percent of the federal budget).

 

Comments (5)Add Comment
An Insurance Company with An Army
written by Robert Salzberg, July 31, 2014 8:33
Paul Krugman has accurately described the federal government as "an insurance company with an army."

The general concept that our federal government spending is being squeezed by Medicare, Medicaid and Social Security is fundamentally wrong.

Dr. Dean Baker goes over the specifics above but leaves out the bigger picture. Government in general is the best way to provide health care and retirement savings. Sure, it would be better if everyone saved enough for their retirement and made enough money to pay for health care in the 'free market'. We don't live in that world.

Health care eats up around 18% of our GDP and a reasonable saving plan for retirement should be around another 6% so if the feds just provided health care and retirement services, it would eat up 24% of GDP. (Of course, our health care expenditures could be cut in half.)

Americans overwhelmingly want to continue Social Security and want universal health care. So what if it costs close to 20% of GDP? That doesn't mean we don't also want education, infrastructure and security spending.

Americans want government services that cost far more than politicians are currently willing to raise taxes to pay for. It's not that current obligations crowd out future needs.

The real problem is that we need to raise the gas tax, eliminate the cap on wages subject to Social Security, institute universal health care with strong price controls, create a carbon tax, institute a financial transactions tax, cut military and security spending down to our needs, increase our spending on infrastructure and education, raise the minimum wage, clean our the tax code of unjustified special breaks, etc.

In short, we want Cadillac services on a Kia budget paid for by yard sales and lemonade stands. Good luck with that.
Don't Let Live Men Hit the Dead Man Switch and Stop the Economy
written by Last Mover, July 31, 2014 10:23
Gene Steuerle is not a standard right-winger who believes that a dollar in the pocket of a middle class or poor person is a dollar that could be in the pockets of the rich. He is a serious budget analyst who has does important work on tax and budget issues for more than three decades. He sees the deficit as a problem precisely because he sees it as having a negative impact on poorer children in both the present and the future. This is why, apart from the great title, his new book Dead Men Ruling, is worth reading. He sets out the deficit hawk case about as well as anyone can.


Yet for purposes of right wing propaganda Steuerle provides the fodder they need to link debt with zero-sum trade-offs between generations. What better way to make the point - however false, however much out of context - than to set it up as a dead-man lock-in of excess spending to (over) benefit one generation at huge opportunity cost to the other.

No, it's not directly about dollars from the pocket of the already poor to the rich or vice versa. But it is about making one generation poor going forward at huge expense to the other, a shameless dodge by the rich who will gleefully endorse the book as they fund and manage the broader sock puppet message of "unfunded debt doom" driven by socialist government redistribution between generations.

The public mind for many in America has proven it cannot grasp government spending/debt, unemployment/full employment and distribution/redistribution at the same time. If it could Fox News et al would collapse overnight. Each trotted out endlessly as a horrow story in its own right by VSPs with condescending furrowed brows and worried frowns reminding their gullible listeners it's obvious as an earthquake or tornado.

Dean Baker debunks the deficit hawk part and by extension redistribution[ u]for whom, by clarifying one, "debt" like SS is widely supported and specifically dedicated, two that much debt is a monstrous waste that could have been avoided and still can going forward and three, debt spending has a function so critical in a deep recession it even reduces itself over the long run.

Dead Men Ruling? The framers of the Constitition are dead. Should they be ruling now or their rules struck down because they're dead. If SS, Medicare and Medicaid are privatized and handed to Wall Street, why does that mean live men ruling are better than dead men ruling because even higher costs are locked in for the future?
maybe doctors in canada make more?
written by djb, July 31, 2014 10:45
social security is not "government" spending.
written by coberly, July 31, 2014 6:01
It is a way for the government to protect the savings of working people against inflation and market losses, while allowing them to insure themselves against certain kinds of personal bad luck.

That is, the workers pay for it themselves. Only by sleight of hand (lying) can they call SS a "government expense" and say that it "crowds out" other needed government spending. SS is workers paying for their own retirement. Their retirement is going to have to be paid for... be 6% of GDP...HOWEVER it is paid for, whether there is SS or not.

SS does not contribute to "government debt" in any way. SS is onlyt "debt" in the sense that a savings account is "debt"... your savings are "lent" to the bank, and the bank owes you a "debt." Your Social Security "tax" is money you "lend" to the Social Security system which uses it to pay back with interest the money lent to it ... in the form of the payroll tax... by the currently retired when they were still working. This is the genius of pay as you go... each generation is richer than the last so the same tax rate can pay back the money contributed by the last generation with an effective interest,

Even if the next generation were NOT richer, Social Security would still be the best way we have to save for retirement a small part of our income protected from inflation and market losses.

It is simply a lie to talk about it as if it were "government spending." ....whether "widely supported" or not.

"making the rich pay for it" by scrapping the cap would turn it into welfare.. and that WOULD be "government spending." This would lead to the destruction of Social Security in everything but name. Don't be suckered into talking about SS the way the Petersons talk about it.
...
written by Tom Stickler, July 31, 2014 8:29
Dean deviates a bit from his usually accurate reporting when he opines "After all, our political leaders are not that much more corrupt and incompetent than those in other countries."

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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