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Home Publications Blogs Beat the Press The New York Times Bemoans the Lost Opportunity to Cut Social Security and Raise the Age of Medicare Eligibility to 67

The New York Times Bemoans the Lost Opportunity to Cut Social Security and Raise the Age of Medicare Eligibility to 67

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Tuesday, 26 July 2011 04:26

That's right, you can read about the "unique opportunity" that was lost right here. The New York Times complains that the likely deficit deals to be produced in the days ahead will not feature:

"significant future savings from Medicare, Medicaid and Social Security — the entitlement programs whose growth as the population ages is driving long-term projections of unsustainable debt."

As every budget analyst knows, Social Security is not a major driver of the deficit. Under the law, it cannot contribute to the deficit. It can only spend money that was raised from its designated tax or from interest earned on the Treasury bonds bought with this revenue. If the trust fund lacks the money to pay benefits then full benefits will not be paid. Furthermore, the projected increase in Social Security benefits over the decades ahead is relatively modest.

The projected increase in the cost of the Medicare and Medicaid is much larger but this is attributable to the projected explosion in private sector health care costs. If the United States faced the same per person health care costs as any other wealth country we would be facing long-term budget surpluses, not deficits.

This fact is important, since it suggests that the more obvious way to reduce the costs of these programs is to fix the U.S. health care system. This would imply lower payments to drug companies, hospitals, doctors and other providers. Alternatively, Medicare beneficiaries could be given the option to buy into the more efficient health care systems in other countries. If these options were presented to the public it is likely that most would find it preferable to denying care to patients as the NYT advocates in this piece.

It is also worth noting how this "unique opportunity" came about. The deficits exploded due to the incredible incompetence of the Federal Reserve Board which allowed the $8 trillion housing bubble to grow unchecked. The collapse of this bubble gave the economy its worst downturn since the Great Depression. High levels of unemployment are projected to persist for a decade.

This economic collapse led to the large deficits that the government is currently running. While tens of millions of people are suffering from the effects of high unemployment and the wealth lost with the collapse of the housing bubble, the NYT views this crisis brought on by Wall Street greed and economic mismanagement as a unique opportunity to cut Social Security and Medicare. Of course, the vast majority of people from all demographic groups (including Tea Party Republicans) strongly oppose cuts to these programs.

Comments (11)Add Comment
worst reporter on White House beat
written by Michael Radosevich, July 26, 2011 9:36
Jackie Chalmes of the NY Times is the worst "reporter" on the White House beat. Her articles consistently read as if written by Obama's press secretary. Obama is always wise, courageous, and brilliant.

After Judy Miller led the cheer leading into the Iraq War, one would think the Times would be a little more careful, a little more critical, in its reporting on the White House. But one would be wrong - the Times gave us a PR mouthpiece for the Obama Administration in the person of Jackie Calmes.

The Times allows comments on most of its stories but never on any written by Calmes. I think they know that the criticism Calmes would receive would be withering.
"long-term projections of unsustainable debt."
written by Paul, July 26, 2011 11:35
Really? With the federal government paying lower interest ratesnow to finance its debt than it did during the budget surplus years of the Clinton administration, just how is the debt "unsustainable"? Is the IMF going to stop us from printing money?

When exactly will the debt become "unsustainable"? When is this doomsday going to arrive? Why can't these Cassandras even give us a ball park estimate?
...
written by PeonInChief, July 26, 2011 11:53
One of the reasons for cutting Social Security and Medicare is to keep younger boomers in the workforce longer. Corporate estimates indicate that there will be a labor shortage beginning in about 2025 (the post-boom generation was very small), and it's easy to see that one way to keep younger boomers in the workforce is to raise the age for Medicare eligibility.
...
written by Randy Moor, July 26, 2011 1:12
"Social Security...can only spend money that was raised from its designated tax or from interest earned on the Treasury bonds bought with this revenue."

This seems to imply SS checks will still be sent out on schedule even if the debt ceiling is not raised.

If Social Security law earmarks current FICA revenues for payments to current SS recipients then wouldn't it be illegal for Treasury to use some of those FICA tax revenues for other purposes instead, like paying off bond holders?

Since the US currently takes in more FICA revenues than we pay out in SS benefits SS checks should be payable and paid even if the debt ceiling is not raised. No?

Sincere question
written by Tim, July 26, 2011 1:37
If SocSec taxes are used to but Treasury bonds, how does that not contribute to the debt?
entitlements?
written by Ethan, July 26, 2011 1:41
I'm kinda pissed that my social security check is called an "entitlement". I, and my various employers, paid into the social security system faithfully. When I was self employed I paid both portions, and when Ronald Reagan was president I started paying more.
Now I want what I bargained for and already paid for. Would enforcement of a private annuity be termed an "entitlement"?
Retirement age
written by ljm, July 26, 2011 1:53
For most people under 65 still working, the retirement age is already 66 soon to be followed by 67 already.

James Kwak has an interesting take on Baseline Scenario looking out to 2020 to figure out the budget. He says this takes into account a recovered economy by 2020. I suppose that's a big "if," but what he writes makes sense to me. He says social security could be left alone as is. He even keeps the Bush tax cuts in place until then and lets them expire in 2020.
Trust fund and debt ceiling
written by Mike B., July 26, 2011 2:14
My understanding is that the money in the Social Security trust fund is part of the debt subject to the debt ceiling. Therefore, if new Treasuries were issued and sold and the funds used to redeem an equal amount of the trust fund, there should be no change in the debt, and so the ability to do this should be unaffected by the ceiling. So not only does Social Security have a dedicated tax (but I don't think it is enough to cover all current benefits), it has the trust fund, so benefits should still be payable.
...
written by denim, July 26, 2011 3:16
Now according to the Values and Lifestyes Public Relations categories, the NYT staff would be mostly inner directly people (historically "socially liberal"). Unfortunately history shows that the deceivers Reagan and Thatcher found just the right key words. They would formulate their messages with these words so as to deceive the inner directeds into being their supporters. Now, instead of being socially liberal, they are filled with the lies of today's conservatism (Me first, you lazy curr! it's your own damn fault.)
It _is_ an entitlement
written by Chris, July 26, 2011 10:03
You are absolutely entitled to Social Security and other benefits, as they are part of the social contract we have. We live in a society where these entitlements have been negotiated over decades and all eligible individuals have these entitlements. Successive governments, elected by We the People, have affirmed this. Even in the current Washington climate, no one is discussing ending these benefits.

None of us should ever feel shame at demanding what we're entitled to as citizens of an advanced democracy- and calling it what it is. When you allow private corporations and interests to redefine "entitlement" to mean "welfare, fit only for the lower classes," you defeat yourself.
...
written by Randy Moor, July 27, 2011 12:57
"So not only does Social Security have a dedicated tax (but I don't think it is enough to cover all current benefits), it has the trust fund, so benefits should still be payable."

I see your point on the logic but in fact according to
http://www.ssa.gov/history/tftable.html
"Even though there is presently more FICA taxes coming in each year than benefits paid out, this has not always been the case. Since 1937, there have been 11 years in which benefits paid out exceeded income and so the assets of the Trust Funds had to be spent to make up the difference."

The chart on that SSA page shows that not since 1982 have receipts been insufficient to cover current benefits. So I continue to conclude that benefits should be payable.

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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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