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Home Publications Blogs Beat the Press Ezekiel Emmanuel Doesn't Like Social Security and Medicare

Ezekiel Emmanuel Doesn't Like Social Security and Medicare

Monday, 21 May 2012 04:25

That is what he told us in his New York Times column that was ostensibly about out of control Social Security and Medicare spending. Emmanuel begins by telling readers:

"If nothing is done about entitlement spending, and if our current tax breaks continue, then by 2025, tax revenue will be able to pay for Medicare, Medicaid, Social Security, interest on the debt and nothing else."

There are two big problems with this story. First there is the old trick of conflating Social Security with Medicare and Medicaid. This is a great trick for those who want to deceive people into believing the budget problem is primarily a demographic story. However, it is highly misleading. The retirement of baby boomers is projected to increase Social Security spending by 0.9 percentage points of GDP or roughly 20 percent between now and 2025.

By comparison, military spending increased by more than 1 percentage point of GDP between 2000 and 2005. In other words, the projected increase in Social Security spending over the next 13 years is relatively modest and easily affordable. It also is fully covered by projected Social Security revenue and assets in the trust fund.

The projected increase in health care spending is considerably larger, however this depends on using the Congressional Budget Office's "alternative fiscal scenario" rather than the baseline projection. The difference is that the baseline projection assumes substantial cost controls that were in the Affordable Care Act. These cost controls, if left in place, would substantially reduce the rate of growth of Medicare costs.

This point is important for two reasons. First it shows directly that the issue is not primarily one of demographics but rather one of exploding health care costs. Second, it is in principle possible to control these costs if the political power of health care providers can be held in check.

Per person health care costs in the United States are hugely out of line with costs anywhere else in the world. If our costs were comparable to those in any other wealthy country we would be looking at long-term budget surpluses rather than deficits. If it is too difficult politically to directly fix the U.S. system we could achieve enormous savings simply by allowing more trade in health care services. We will only see the explosive growth in health care costs described in the alternative fiscal scenario if health care providers and insurance companies are both powerful enough to prevent domestic reform and to maintain protectionist barriers that prevent people in the United States from taking advantage of lower cost care elsewhere. 

It is also worth noting that Emanuel's proposed cuts in these programs would hit people with average lifetime earnings of $40,000 and above. It might make more sense to place more burden on people earning $250,000 and above by raising their taxes.

Comments (16)Add Comment
written by liberal, May 21, 2012 7:51
It might make more sense to place more burden on people earning $250,000 and above by raising their taxes.

It certainly makes more sense in terms of the "ability to pay" principle. But the best way to increase revenues is still to tax economic rents at extremely high levels.
written by Jeffrey Stewart, May 21, 2012 8:11
Why is it always people who don't depend on Medicaid and aren't going to depend on Social Security and Medicare the ones arguing for cutting the programs? It seems it's a class war tactic of repeatedly publicizing the wealthiest voices calling for these cuts. Of course this leaves aside the absurdity of cutting the programs now so they don't have to be cut in the future! Meanwhile the Progressive Caucus's Budget for All received crickets from the capitalist, corporate media.
Why? ...
written by Phil Perspective, May 21, 2012 11:06
Jeffrey Stewart:
Ezekiel is carrying water for his brother. It's as simple as that.
Get Fit, Low-rated comment [Show]
The Old Trick
written by JohnWisc, May 21, 2012 11:20
You are right, it is incredible how every media source just repeats the statement that Soc. Sec., Medicare and Medicaid will bankrupt the country based on false assumptions. I never hear of bringing health care costs under control or letting competition in from overseas.
More trade in health care services?
written by tedb, May 21, 2012 1:06
I am troubled by the recommendation to pursue more trade in health care services. How exactly would that work out? Is the best solution really to offshore more of another (i.e., health care) industry? Wouldn't this solution only be feasible for the upper middle class who could afford the international travel while the lower classes would be left to fend for themselves in a health care system that would be more desperate due to the lost income? If we have come to the point of conceding that our political system is too broken to address major problems, then the American experiment really has failed. We might just as well recommend emigration to more successful countries. I'd say we should try a little more before giving up on our country.
Why worry about Trust Fund debt?
written by Jack, May 21, 2012 1:09
If Ezekiel is worried about the interest cost of the Social Security Trust Fund Treasuries I wonder how he feels about the interest costs of all the other Treasury notes held by all other entities? Outstanding amount of that debt, according to which table one consults, is about $12.5T. Total Social Security Truat Fund Treasury holdings is in the range of $2.6T. A drop in the bucket, so to speak.

The solution is simple. Stop selling Treasury Notes and raise federal taxes to offset the loss of funds. Cutting military spending will also help a bit. But Social Security is paid for by a dedicated payroll deduction (by law) general revenues only cover the interest income generated by the excess funds collected and held by the Treasury (again by law). Debtors are expected to pay their debts. The lender didn't cause the problem.
Self Help
written by Rajid Manqi, May 21, 2012 1:19
I must agree with comments here that point out the huge savings we'd have in US health care if more people took responsibility for their own health. Preventive health care is logical, cheap and socially responsible. What's wrong with pointing that out? Citizens of this country have an enormous amount of control over their own health. By 2032 (only 20 years!) 42% of this country will be OBESE! Not just "over weight" but OBESE. Dietary control is available to all of us. Certainly, we need more affordable health care, but it's soaring in great part due to people expecting OTHERS to make them healthy. Just like Pogo said, "We've seen the enemy and he is us".
defense, medicare/caid are spending; SS is a transfer
written by pete, May 21, 2012 1:44
This is really the biggest problem with all this analysis. The govt. taxes (or equivalently borrows) and either buys airplanes or writes checks back to people. Buying airplanes takes stuff away from our ability to consume, SS, unemployment, etc. just returns the taxes to the people to spend. No effect on GNP, just a transfer...not a problem in any sense of the word, other than an increasingly large cash flow.

One solution would be to "fund" old age benefits with newly printed money, solving the problem of random ineffective monetary policy and funding of retirement.
E.E.. means well, but he's making some serious mistakes
written by Rachel, May 21, 2012 3:30
As Dean and others have noted here, it's a mistake for E.E. to equate Social Security and Medicare costs.

Moreover, we don't have a problem with high demand, so much as high costs. Admittedly, our high obesity rates raise demand. And one source claims that our melanoma rates are unusually high. But the big problems are high prices of labor, drugs, imaging and administration. And if we want to begin to bring total costs down without causing very excessive suffering, we do something about the prices.

Dean, of course, has always advocated improving markets by importing more labor, as well as offering access to overseas services. But we might boost employment at home if we made more efficient use of the talent we have, by removing some of the worst restrictions on labor.

There's some analysis of this in a "Perspective" essay at NEJM, Jan.25,2011, http://www.nejm.org/doi/full/10.1056/NEJMp1012121
written by saurabh, May 21, 2012 4:36
Regarding obesity, while I agree that the health care benefits of reducing obesity would be enormous, it's not quite fair to blame the lazy public for the rapid growth of obesity. This has much more to do with the consolidation and mechanization of the food industry; the average consumer's diet is steadily worsening because the food supply they are exposed to contains more processed foods based on corn and soy. These are systemic problems - we subsidize corn and soy production to feed our meat industry. As a result, there is a huge effort to create a market for corn and soy derivatives, because the stuff is oversupplied. We should stop subsidizing these things. The price of meat would also go up, and people would eat less of it, which would be another boon for public health.
If health care costs are "controlled" the economy tanks
written by MGK, May 21, 2012 5:26
The reality with health care expenditures is that at 17% of GDP, we are double other developed countries. At the same time, health care has been about the only major source of jobs growth. So now, slice 50% of our health care tab and eliminate 8.5% of GDP. That's greater than the output decline during the worst of the economic downturn that the past few years. The US is addicted to "sick" care just to keep people employed.

As far as SS goes, the well runs dry (outlays greater than contributions plus the "trust" fund which is nothing more than accouting) in 2033 which is 3 years earlier than the trustees said it would be just last year. In reality, it's actually an issue in 2026 because SS requires a year's worth of outlays in the trust fund at all times.

All we;re doing is spending more and more on immediate consumption with nothing for future growth. How exactly is the economy supposed to grow to support all this projected consumption?
written by Alan in SF, May 21, 2012 8:39
Ezekiel Emanuel isn't stupid, so we can only assume he's being deliberately deceitful. This is your Democratic Party.

Note TO MGK: Money not spent on health care will largely be pumped back into the economy and spent on things that are more useful, more productivity-enhancing, and have more multiplier effect.
written by Alan in SF, May 21, 2012 8:47
Rajid: While obesity does add to America's health care costs, the main culprit is that Americans pay way more per service than any other country. http://www.washingtonpost.com/..._blog.html
written by urban legend, May 21, 2012 10:04
An alleged Democrat who makes these bogus arguments about Social Security doesn't "mean well." What a disaster Obama unleashed on this country by giving a platform to the Emanuels. Sorry, but they are not nice people.
responing to Alan
written by MGK, May 22, 2012 9:19
You are somewhat correct that money not spent on health care may be pumped back into the economy, but not completely. If Medicare outlays go down, this will allow the Medicare fund to grow which will offset the deficit somewhat, but not really flow back into the economy. In addition, what will happen with those reduced helth car expenditures in terms of jobs? This is likely ot increase unemployment and require greater outlays from that standpoint. Unwinding overdependence on a specific sector of the economy even when that sector is profoundly unproductive is not simple, straightforward, rapid., nor without pain and discomfort

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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.