Monday, February 08, 2010

Samuelson Wants to Slash Support for the Elderly, Round...

I've lost count. In any event, it's yet another argument by Robert Samuelson to slash Medicare, Medicaid and Social Security. His initial premise isn't what's bad:
In all the recent reports, speeches and news conferences concerning the federal budget outlook -- including the administration's proposed budget for 2011 -- hardly anyone has posed these crucial questions: What should the federal government do and why; and who should pay?
Samuelson argues that current expenditures and their projected growth will make it impossible "to close the massive deficits without big cuts in existing government programs or stupendous tax increases." That, of course, ignores the fact that healthcare reform could reduce the overall cost of healthcare for the nation, and could potentially both increase quality and decrease healthcare inflation. When it comes to reform, other than "slash, burn and privatize", Samuelson appears to be in the "just say no" club. And having fixed himself in that corner, he is comfortable saying "No borrowing or tax increases to pay for this" because he knows that absent reform the financial situation will continue to deteriorate - perpetuating the vicious circle that he uses to support his argument for slash and burn. The only other government program he identifies for possible cuts? Farm subsidies.

Samuelson proposes raising the eligibility age for Social Security and reducing the benefits available to wealthier retirees. You could argue that he's missing the point - wealthier retirees for the most part paid a lot more into the system during their lifetimes and thus, as the system is designed, are supposed to receive higher payouts during their retirement. But he knows that. He's pushing a "reform" that can reasonably be expected to diminish support for Social Security among higher wage earners, with the goal of shifting the program from an insurance system that benefits everybody to a welfare system that could be viewed as expendable. Seriously, an argument can be made for replacing Social Security with a welfare program for the elderly, but any such program should be funded out of the general fund. (And we shouldn't forget that the reason people like Samuelson prefer that to the status quo is that welfare programs are easier to cut or eliminate.)

Further, the consequence of raising the age of eligibility would inevitably be an increase in expenditures out of the general fund, as retirees in their late sixties seek disability benefits instead of retirement benefits. Samuelson proposes,
Eligibility ages for Social Security and Medicare should be gradually raised to 70, coupled with a requirement for people to buy into Medicare at 65.
But what if a sixty-five year old can't afford the premium? Also, given that the fundamental problem with Medicare is the high cost of end-of-life care, how would that translate into a level of cost savings that would prevent the fiscal nightmare Samuelson projects? Further, why not take things in a different directly - let anybody over the age of 55 buy into Medicare at a rate such as "the average cost per recipient plus ten percent"? The extra revenues generated would subsidize care for those over 65, and you wouldn't need to impose a means test for a full or partial waiver of premiums for those between ages 65 and 70 - something likely to erase much of the revenue that Samuelson imagines would be generated by the mandated buy-in.

But let's get back to Samuelson's initial argument - that we need to ask "What should the federal government do and why". What gargantuan federal expenditure isn't mentioned in Samuelson's piece? (I doubt I have to tell you that it's military spending.) Part of a debate over the proper role of the federal government is whether or not we should scale back our military expenditures. Do we need to be exponentially more powerful than the next largest military power, or is a smaller increment more reasonable? If you need to be reminded, here's what Samuelson has previously argued about military expenditures:
A possible war with Iraq raises many unknowns, but “can we afford it?” is not one of them. People inevitably ask that question, forgetting that the United States has become so wealthy it can wage war almost with pocket change. A war with Iraq would probably cost less than 1 percent of national income (gross domestic product). Americans have grown accustomed to fighting with little economic upset and sacrifice.
When it comes to war, the Iraq war (more than $1 trillion spent to date, many projections of long-term cost in the $2-3 trillion range) is "pocket change"? As compared to Samuelson's dire scenario from ten years in the future?
In 2020, the gap is $1 trillion, again approaching a fifth [of spending]: Spending is $5.7 trillion, taxes $4.7 trillion.
Suddenly that $1 trillion has become "real money".... No, it's a matter of priorities:
But I am certain — now as then — that budget consequences should occupy a minor spot in our debates. It’s not that the costs are unimportant; it’s simply that they’re overshadowed by other considerations that are so much more important.
If Samuelson supports the expenditure, budget issues are at most a minor distraction. So it's far from a surprise that when Samuelson calls for a debate on what "the federal government do and why; and who should pay" he means only to gore somebody else's ox.

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