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Home Publications Blogs Beat the Press National Public Radio Redoubles the Effort to Cut Your Social Security and Medicare

National Public Radio Redoubles the Effort to Cut Your Social Security and Medicare

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Wednesday, 10 August 2011 03:35

Wall Street investment banker Peter Peterson has pledged $1 billion to the effort to cut Social Security, Medicare, and Medicaid. Other Wall Street types are doing their part, as is National Public Radio.

They are doing a full court press now -- things are really terrible, if you don't give up your Social Security and Medicare, then the economy might collapse. (Oh yeah, the economy already did collapse because none of these people were troubled by the $8 trillion housing bubble, but don't think about that.) Standard and Poor's might have to downgrade the U.S. again, even if they can't get their arithmetic straight. (Math is hard.)

NPR did its part yesterday with a piece that told us that the debt is not just that scary $14 trillion number that we all hear, it's actually -- stand back boys and girls -- $211 trillion!!!!!!

Are you impressed? You should be. This is an extraordinary example of cesspool journalism that would even embarrass Fox News.

The piece gets from the debt number normally reported to $211 trillion by doing some unusual accounting (following a methodology developed by Boston University economist Lawrence Kotlikoff) and also hiding assumptions about exploding private sector health care costs. First, the calculation adds up all the Social Security and Medicare benefits that current workers are projected to receive and then assumes that no new workers pay taxes into the system.

This methodology would imply enormous deficits in these programs even if they were projected to be fully solvent forever, in the sense that current tax payments would always pay current benefits. The reason is that today's workers will provide a smaller share of the tax revenue as more of them retire. It is unlikely that any of NPR's listeners would be very scared if it told listeners that Social Security and Medicare would be fully solvent indefinitely, but applying the methodology from this segment it could tell listeners about tens of trillions of dollars in uncounted debt.

The other part of the story is that much of this $211 debt figure is driven by projections of exploding private sector health care costs. Per person Medicare costs are projected to rise far more rapidly than the rate of economic growth in the projections used in this segment (albeit not in the Congressional Budget Office's baseline or the Medicare Trustees projections) because private sector health care costs are projected to rise far more rapidly than the rate of economic growth. The projections in this segment imply that the cost of providing a Medicare equivalent policy for an 85-year old in 2030 will be $40,000 a year (in 2011 dollars) in 2030. The cost would exceed $100,000 a year (also in 2011 dollars) by 2080.

If private sector health care costs actually follow the path assumed in this segment's debt calculations it would devastate the economy even if we eliminated public sector health care programs like Medicare and Medicaid. On the other hand, if U.S. health care costs were contained, like those in every other wealthy country, then there would be no long-term deficit problem.

An honest news report would have discussed the projections of explosive private sector health care costs and what they mean for the economy if they prove true. It would not hide these projections in a huge debt figure and tell its listeners that the debt is much bigger than they realize.

The only possible point of a piece like this is to scare people. It provided no information whatsoever about the country's fiscal situation to NPR's listeners.

Comments (6)Add Comment
...
written by skeptonomist, August 10, 2011 9:51
Kotlikoff apparently uses figures like the $211T as a rhetorical device. One of his positions is that deficits and debt are arbitrary constructions, which actually makes some sense (what does it mean if the U.S. owes $10T to its own citizens?). His real message obviously went over the heads of the NPR writers who just jumped on the number.
...
written by Jim In Panama, August 10, 2011 10:20
I must disagree with your statement that this was an "example of cesspool journalism that would even embarrass Fox News". It would not, sir.
Context will set NPR free of fear
written by Union Member, August 10, 2011 12:14

I f only NPR knew that Social SECURITY was created by the Government out of the scary darkness of the financial collapse, of the 1930's; and, a short two years, following the enactment of Glass-Steagall, which protected the scary Banks from themselves.
Social Security then worked just fine for 75 years, independent of the viscitudes of Government budgets. Now, twelve years after Gramm-Leach removed the safegards of Glass-Steagall, allowing the sociopaths of finance to wreck the world economy, and subsequently aggravate public and priv ate debt worldwide, NPR is terrorizing its listeners toward sacrificing the Social Security they pay for inorder to cover scary ill-defined "debt" which Social Security doesn't contribute to.

NPR should know not to believe scary stories you hear on the the radio, like Orson Well's 1938 "War of the Worlds.
...
written by MB, August 10, 2011 2:27
This morning either NPR or Marketplace talked about the importance of "certainty" to businesses---about how much they like to know what's happening, want stability so they can plan around their expectations, etc. And it was very convincing and I agreed with them. But no connection was made about how ordinary people also value stability and certainty in our own lives.

Most of us who are lucky enough to still have jobs earn weak retirement benefits from our employment and will likely rely almost entirely on Social Security. But we pay into volatile 401k accounts (presented as good investments) that will likely not go the distance in providing adequate retirement income---and most don't even realize it.

But the news hardly mentions the high risks/low yields from poorly designed, unreliable 401k's. Instead we are told all the time about the fragility of Social Security and we mostly get happy talk about 401k's when reality is more likely the reverse---SS is better run, more accountable, and more reliable than our employer-based retirement accounts.

So individually we face tremendous uncertainty about hugely important parts of our lives but on that issue the official concern is about whether or not businesses can feel good about the reliability of their own assumptions.

Most of us have no certainty about our retirement benefits or about the durability of our health insurance, even if we are lucky enough to have some. So for most it's almost better to just not think about it, and that is how many ordinary people cope with those uncertainties. It's as if the fear-mongering about SS is actually intended to keep us from noticing the poor quality of our employer-provided health & retirement benefits.

The discussion about certainty being good for businesses might have been in this story but there was a woman's voice so maybe it was another one: http://marketplace.publicradio...ntil-2013/
Question about Prof Kotlikoff's analysis
written by Jan, August 11, 2011 6:56
Is there anywhere I can read how he did his calculation, so I can understand it? What are the assumptions, what is the technique? Thanks.
and I thought it was just me
written by George Fleming, August 15, 2011 1:21
A few days ago NPR's Steve Inskeep interviewed Barney Frank on the budget problems. Among other points, Frank stated the truth about SS - that it was fully funded for decades and did not add one cent to the deficit. But Inskeep ignored him and kept interrupting with the battle cry "entitlements, entitlements, entitlements!" Then he said that he had to end the interview. Frank barely got in the statement that he couldn't explain complicated matters in five seconds.

NPR is a disgrace. They are so worried that right-wing fanatics will cut their funding that they constantly repeat the lies of the conservatives and treat their ringleaders as rational people.

And when the "sort of/kind of" count gets as high as it has been at NPR for many years, it is time to draft every one of them for immediate deployment to Afghanistan. Maybe then we can get that old song out of our heads, "Masculine women, feminine men, who is the rooster, who is the hen?"


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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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