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.