Robert Reich: The Truth Behind the Social Security and Medicare Alarm Bells

[marmar]

from TPM:



The Truth Behind the Social Security and Medicare Alarm Bells
May 13, 2009, 8:01AM


What are we to make of yesterday's report from the trustees of the Social Security and Medicare trust funds that Social Security will run out of assets in 2037, four years sooner than previously forecast, and Medicare’s hospital fund will be exhausted by 2017, two years earlier than predicted a year ago?

Reports of these two funds' demise are not new. Fifteen years ago, when I was a trustee of the Social Security and the Medicare trust funds (which meant, essentially, that I and a few others met periodically with the official actuary of the funds, received his report, asked a few questions, and signed some papers) both funds were supposedly in trouble. But as I learned, the timing and magnitude of the trouble depended a great deal on what assumptions the actuary used in his models. As I recall, he then assumed that the economy would grow by about 2.6 percent a year over the next seventy-five years. But go back into American history all the way to the Civil War -- including the Great Depression and the severe depressions of the late 19th century -- and the economy's average annual growth is closer to 3 percent. Use a 3 percent assumption and Social Security is flush for the next seventy-five years.

Yes, I know, the post-war Baby Boom is moving through the population like a pig through a python. The number of retirees eligible for benefits will almost double to 79.5 million in 2045 from 40.5 million this year. But we knew that the Boomers were coming then, too. What we didn't know then was the surge in immigration. Yet immigrants are mostly young. Rather than being a drain on Social Security when the Boomers need it, most immigrants will be contributing to the system during these years, which should take more of the pressure off.

Even if you assume Social Security is a problem, it's not a big problem. Raise the ceiling slightly on yearly wages subject to Social Security payroll taxes (now a bit over $100,000), and the problem vanishes under harsher assumptions than I'd use about the future. President Obama suggested this in the campaign and stirred up a hornet's nest because this solution apparently dips too deeply into the middle class, which made him backtrack and begin talking about raising additional Social Security payroll taxes on people earning over $250,000. Social Security would also be in safe shape if it were slightly more means tested, or if the retirement age were raised just a bit. The main point is that Social Security is a tiny problem, as these things go. ...........(more)

The complete piece is at: http://tpmcafe.talkingpointsmemo.com/talk/blogs/robert_reich/2009/05/the-truth-behind-the-social-se.php

[MarjorieG]

1. If to be tinkered with, I'd rather an Obama admin make them, than a future GOP raid on the middle

class. Talk of budget proportion helpful, as people are whipped by media laziness to talk about Obama's spending as more impactful than entitlements.

[hfojvt]

2. "this solution apparently dips too deeply into the middle class"

edit: the idea of raising the cap.

that was only according to Richardson, who jumped on that right away and Clinton who also spoke up for "firefighters" who make over $100,000 a year in NYC. Obama hit back pretty good when he insisted that they are the top 6%, which is not very "middle".

But it would sorta go against his campaign pledge to not increase taxes on people making less than $250,000.

[zipplewrath]

3. Missed the best paragraph

You didn't reference the best paragraph (IMHO)

Don't be confused by these alarms from the Social Security and Medicare trustees. Social Security is a tiny problem. Medicare is a terrible one, but the problem is not really Medicare; it's quickly rising health-care costs. Look more closely and the real problem isn't even health-care costs; it's a system that pushes up costs by rewarding inefficiency, causing unbelievable waste, pushing over-medication, providing inadequate prevention, over-using emergency rooms because many uninsured people can't afford regular doctor checkups, and spending billions on advertising and marketing seeking to enroll healthy people and avoid sick ones.