Robert Samuelson—Why are we in this debt fix? It’s the elderly, stupid.
If leadership is the capacity to take people where they need to go — whether or not they realize it or want it — then we’ve had almost no leadership in these weeks of frustrating and maddening debate over the budget and debt ceiling. There’s been an unspoken consensus among President Obama, congressional Democrats and Republicans not to discuss the central issue underlying the standoff. We’ve heard lots about “compromise” or its absence. We’ve had dueling budgets with differing mixes of spending cuts and tax increases. But we’ve heard almost nothing of the main problem that makes the budget so intractable.
It’s the elderly, stupid.
By now, it’s obvious that we need to rewrite the social contract that, over the past half-century, has transformed the federal government’s main task into transferring income from workers to retirees. In 1960, national defense was the government’s main job; it constituted 52 percent of federal outlays. In 2011 — even with two wars — it is 20 percent and falling. Meanwhile, Social Security, Medicare, Medicaid and other retiree programs constitute roughly half of non-interest federal spending.
1. Mark Baddeley wrote:
Reading the comments drove home just how hard the U.S. is going to find digging itself out of the growing hole. Just laying out the facts prompts the most intemperate responses. Taking entitlements away from a generation that has had it good their whole lives, sees it as the silver lining about getting old, and votes in greater numbers than the generations after is going to be almost impossible. No politician will be able to touch them until after America’s economy has already been significantly damaged by trying to pay for them. People will have to actually experience that it is unsustainable until a critical mass will support significant changes.
July 29, 12:33 pm | [comment link]
2. BlueOntario wrote:
I’m afraid that you’re correct. Sliding-scale and needs-based outlays of budgeted amounts is a solution considered “too socialist!” Yet, the whole concept of these programs is socialist. Fix them now and plan for better.
July 29, 2:30 pm | [comment link]
3. Cennydd13 wrote:
O-kay, then what does Mr Samuelson propose that we do about the elderly? Cut ‘em off? Nope! Won’t happen! Then what? Extend the retirement age? Already done! Cut the rich off from their benefits? Why…...they earned ‘em like the rest of us, didn’t they? So what’s the answer? Eliminate the benefits entirely? And replace ‘em with what? And while we’re at it, why not eliminate military retirement benefits for disabled veterans? Fine…..if you want to make these vets and their families suffer even more than they already have! I could think of a few more things to suggest, such as eliminating Congress’ pension plan and health insurance, among other things, but I think I’ve made my point.
July 29, 3:12 pm | [comment link]
4. Dan Crawford wrote:
As an “elderly” person who paid my Social Security and Medicare taxes for 45+ years (for nearly 20 of those years I paid 100% of the Social Security and Medicare tax as a clergyman), I totally accept the blame from people like Samuelson who will never have to worry about the cost of his medical care or whether his pension will cover the expenses of his lifestyle. I understand the horrible burden I placed on his shoulders and the shoulders of his fellow oligarchs when the government bailed out corporate America to protect bonuses of executives who had driven the economy into the ditch and looted the honestly earned pensions of their workers. I only ask that we elderly be placed in an internment camp somewhere in Florida or California and be allowed out once a year to go to Disney World so that we might publicly repent in Wonderland.
July 29, 3:26 pm | [comment link]
5. Mark Baddeley wrote:
Hmmmn, a choice between either full-steam ahead with a system which pays out, on average, significantly more than the person put in, even when interest and inflation is taken into account, or an internment camp. Shame those are the only two options going, it makes the problem truly insoluble.
July 29, 4:58 pm | [comment link]
6. Teatime2 wrote:
There are elements about who seem intent on inciting generation and class wars, as if this country isn’t divided enough.
July 29, 7:21 pm | [comment link]
7. Cennydd13 wrote:
If they aren’t careful, they just might succeed.
July 29, 10:25 pm | [comment link]
8. Todd Granger wrote:
Well put, Mark Baddeley. Reason must be brought to bear. Surely people can realize that reductio ad absurdum arguments contribute nothing to the public discourse - save to foster the very divisions that are being decried (with unintentional irony) in subsequent comments.
July 29, 11:28 pm | [comment link]
9. jkc1945 wrote:
My parents and grandparents would not have had any understanding of “retirement.” They were farmers and farmer’s wives, and they knew one thing - - you lived your life, planted a crop every spring, harvested it in the fall, and if you could find time in there somewhere, you took a little time for a vacation, either to go to a church conference or maybe to the shore for a few days. Retirement? Ridiculous. There was a farm to take care of, and kids to raise. The idea of retirement is a relatively new one. Maybe we could eventually come to realize that God has not put us here to retire.
July 30, 8:10 am | [comment link]
10. cseitz wrote:
#5—and unless changed, will pay it out for a larger group, with a smaller group contributing. Samuelson is indicating that this is a train wreck and needs to be fixed. He is bemoaning the lack of political courage to call the problem a problem and to propose ways of addressing it.
July 30, 8:50 am | [comment link]
11. Mark Baddeley wrote:
re: cseitz #11
I agree. But I think that in a democracy it is too easy to constantly blame the politicians. In a democracy, above all other forms of government, over time people get the leaders that they are prepared to live with. And no leader, no matter how courageous or capable, can take the people where they don’t want to go. That’s not a bug, that’s a feature of democracy, it’s designed to safeguard against tyranny.
But that means that when there is a serious problem, it can only be addressed politically if there is a willingness among people for it to be addressed. And that’s clearly not the case now. Any courageous politician on this issue will lose their seat and accomplish nothing on this or any other issue they care about. The problem isn’t the politicians, it’s the people. Survey after survey shows that people want the debt down but these programs untouched. Until the two are linked in their minds the debt will keep going up, for to touch the programs is instant ballot box loss.
One reason why I’m not that sympathetic about the argument that people have paid their social security and the like and so they are now entitled to these programs is that they also, as a group, stood by as that money was spent on programs at the time rather than saved and invested for when it would be needed. They didn’t ask politicians to spend it, but politicians who did were rewarded for bringing home the bacon. If it was a single sitting of Congress that lost their heads, spent everything and were kicked out the next elections that would be one thing. But this money was spent for decades and decades on the basis that the taxes of the next generation would pay for the entitlements of the current generation. It wasn’t done in secret, anyone who wanted to know what was being done with their Social Security taxes and the like could easily find out. That changes the moral calculation in my opinion.
For the present, no politician can do anything other than kick the pcan further down the line if tackling the can is only going to open a lethally toxic can of worms, and still leave the problem unsolved. The problem has to be addressed at the level of the populace (at least the voting populace) before it can be addressed in Washington.
July 30, 9:30 am | [comment link]
12. cseitz wrote:
July 30, 10:57 am | [comment link]
I watched the race in the Buffalo region where the one candidate==very intelligent and careful—faced into this problem. She was defeated. Images of wheelchairs going off cliffs, etc.
Like a lot of things, it appears it must get so bad that people then can’t avoid the reality.
13. Kendall Harmon wrote:
Dan in #4, even though I wince at the cynicism I perceive underneath your comment, I know it must be galling the have had the bailout with all its huge sums of money and yet when it comes to these programs…there seemingly isn’t the will to tackle it.
Certainly these programs are worthy of support; a just society needs a safety net.
The problem is the program has expanded in ways its originators never properly foresaw, and it is fast becoming an albatross around all our necks. Avoiding facing this will just make it harder later.
Just consider the Medicare piece for a moment. Let me remind everyone of the truth on this program from a previous thread:
Consider an average-wage, two-earner couple together earning $89,000 a year. Upon retiring in 2011, they would have paid $114,000 in Medicare payroll taxes during their careers.
But they can expect to receive medical services - from prescriptions to hospital care - worth $355,000, or about three times what they put in.
The estimates by economists Eugene Steuerle and Stephanie Rennane of the Urban Institute think tank illustrate the huge disconnect between widely-held perceptions and the numbers behind Medicare’s shaky financing. Although Americans are worried about Medicare’s long-term solvency, few realize the size of the gap.
“The fact that you put money into the system doesn’t mean it’s there waiting for you to collect,” said Steuerle.
Now look—that is just unsustainable, and arguably it will continue to get worse.
That is what Samuelson is trying to say, and he is right. We have to get past denial and on to solutions….
July 30, 11:41 am | [comment link]
14. wildfire wrote:
I believe there would be an overwhelming consensus in this country to make the minimum number of structural changes to social security and Medicare necessary to preserve the basic thrust of these programs as much as possible. Few want to eliminate them, but as Samuelson and many others note, keeping them unchanged is simply not an option. But the debate needs to had directly on these programs, not on the debt limit. That means laying out the facts to the American people, laying out the possible options, debating this difficult issue in a responsible way over time and going to an informed electorate on these issues.
We don’t have a TV so I am not in a position to judge whether this informed debate is occurring, but I doubt it is and that is the thrust of Samuelson’s argument. His implicit solution, means testing, is not the only obvious one, and would inevitably lead to two systems of care—something I am reluctant to endorse even as I realize that many on Medicare do not need the subsidies. But I value having them in the system rather than in a private pay first class section.
July 30, 12:57 pm | [comment link]
15. Teatime2 wrote:
In regard to Medicare contributions versus medical costs, the gap isn’t necessarily that large. First of all, the contributions should be invested so that the interest earned should also be part of the available funding. Secondly, as with all other insurance programs, there should be an offset—some folks receive a lot of care and others, not so much. There are also people paying into Medicare who will (unfortunately) die before being eligible for benefits or shortly afterward.
But with the cost of medical care, why blame the elderly (and disabled) because the cost of care has skyrocketed? Big pharma rakes in huge profits here in America and when the cost of drugs is questioned, threatens not to put money into R & D. But medical treatment in other countries isn’t big business—it’s socialized medicine. Medical researchers in the UK, for instance, still produce new treatment protocols. We need to learn from that.
Furthermore, when you think about it, medical costs SHOULD be less now than in previous generations. Why? Because we have sophisticated imaging that has made the former “exploratory surgeries” unnecessary. We have advanced surgical techniques that have reduced hospital stays from several days to “day surgery.” And we have pharmaceuticals that are keeping heart attacks and other conditions at bay. Yes, research and technology costs but at some point, the R & D costs and the price of the equipment have been amply covered, so the huge fees for the services should decrease. But they don’t, and that’s a problem.
July 30, 2:05 pm | [comment link]
16. BlueOntario wrote:
I think the consensus is that Social Security and Medicaid/Medicare can be fixed - after I get what’s mine.
July 30, 3:15 pm | [comment link]
17. Dan Crawford wrote:
I’m sorry, Kendall, but if I seem cynical, it is because I am. I have watched the Fools on the Hill far too long to believe that they have any interest at all in “fixing” anything, and certainly not the (corporate) systems that have risen around Medicare and every other social support system. Where is the information on the corporate profits of insurance companies who grow fat off Medicare and their health “insurance” profits? How many of these corporations “rig” the system to enhance their profit margins? The “prescription drug plan” put in place by the same man who made sure his buddies on Wall Street kept their summer homes, and flashy cars, has helped the pharmaceutical, insurance and corporate medicine types more than it has helped the elderly people I know who often reach the “donut hole” with a half year or more remaining. How is the “donut hole” calculated? By combining what the person pays and the insurance company pays. Blue Cross/Blue Shield contracts with a company called Medico and strongly encourages its subscribers to get their prescriptions from it. I discovered that Medico will gladly fill a prescription, but will not allow me to pay directly and not have it charged against my insurance because they use the copay- insurance scheme to get to the donut hole faster. I have learned to avoid this by getting my generic medications from Costco which are considerably less expensive than Medico’s and do not count against the total cost of prescription drugs in the advantage plan. Why does the government allow a pharmaceutical company to advertise and incredibly expensive medication which may prolong the life of a prostate cancer patient by two months at most? Why is Viagara covered by Medicare? I could go on and on, but nowhere is anyone talking about systemic change except changes that directly affect the benefits of those who earned them. And whose bright idea was it to wage two wars without any kind of tax increase, especially on those persons and corporations which profit from the wars? And where in the “debates” waged on capital hill or in the harangues of would-be presidential candidates is there any sense at all that America is a community - not a collection of right-wing and left-wing self-interests, of the interests of the rich and the interests of the poor? Where is the any consideration of the Gospel of Jesus Christ, especially the 25th Chapter of Matthew, when Congress will preserve its pay raises, its health insurance, its impressive benefits while dumping on citizens who have little of what Congress has? Some of those on the evangelical right give every impression they haven’t a clue in their vehement advocacy of the most stringent cuts and policies in social welfare programs. I commend the US Conference of Catholic Bishops for its recent letter suggesting that Congress and the public debate about the debt ceiling are ignoring certain fundamentals in society which claims is it a great nation while trumpeting the idols of self-interest and God knows what else.
Yep, I’m cynical and while not proud to acknowledge it, I still wait for someone to recognize that the politicians have no clothes - even in their public lives.
July 30, 7:58 pm | [comment link]
18. Bookworm(God keep Snarkster) wrote:
“The problem isn’t the politicians, it’s the people. Survey after survey shows that people want the debt down but these programs untouched”.
Add to that all the Welfare payouts to illegals and others, not to mention govt-subsidized companies like Fannie/Freddie giving high-risk housing loans to people who should not have them, and what you’ve got is a broke nation.
When I hear Americans talk of socialized medicine, I’d like to see those people be the first to sign up—see how you like it when you are 75 years old and refused your bypass or your cataract operation(unless you can pay cash for it yourself, or have the money to carry other private health insurance) because you don’t fall under the treatment protocol. Or be like the tragic case of Natasha Richardson, skiing in an area unserviced by LifeFlight, and thus dying after a probably fixable head injury; if only they had been able to get her help in time. Do you realize that the people who live in places like that simply ACCEPT the fact that, if they have a similar head injury in any sort of accident(personal, car, whatever), they are going to die? Are you willing to accept that in this country? And no, litigating the state or city because they did not provide the service you needed would not be allowed. Your survivors would be out of luck on that score…
Technology costs money—R & D, sophisticated computer equipment, imaging machines, the education of health care personnel, etc. My friend’s elderly father had a GI bleed that could not be found until he underwent a sophisticated procedure in which he swallowed a camera and was imaged ALL THE WAY DOWN; with the AV malformation finally found deep in his small intestine. He then had surgery to remove that section. And the only reason he got all this was because he had good benefits himself, lived in a monastic community which was willing to help with all the costs, and had a son who was a doctor who could hook him up with the best care at a Boston hospital. As we have developed such technology, and don’t want to do without it, and seek to live as long as possible, the costs will rise with the expense of technology and a supply/demand scenario.
The programs are broken and require attention and fixing—and socialized medicine will not be the answer here in such a large, entitled society, whether we like that or not. Or, you will also start to see a culture where the less affluent die off, and the affluent live as long as their money and the doctors they pay can dictate.
July 31, 1:36 am | [comment link]
19. Sarah wrote:
RE: “Where is the any consideration of the Gospel of Jesus Christ, especially the 25th Chapter of Matthew . . . “
Yes, because if there’s one thing that Matthew 25 talks about it’s the importance of national political leaders violating their sworn oath of defense of the Constitution’s limits on Federal power and size and the equal importance of those national political leaders spending other people’s money through State central planning and giving back cents on the dollar to the individuals from which they took the money [after the government bureaucrats have been paid of course] all in an effort to help “the poor” as the national political leaders have defined them and in the manner in which the national political leaders decide.
It quite warms my heart to now know what Matthew 25 has been talking about all this time.
Setting aside the wild shotgun blasts levied against the various groups to blame [you know, insurance companies, President Bush, a company called Medico, etc, etc] and moving on to the substantive and thoughtful comments [Bookworm, cseitz, Baddeley, and more], I think the main problem I have with limiting Medicare entitlements to the aged is that their money was already stolen from them by the central-planning/Ponzi scheme leaders and they didn’t get the chance to invest it. Having $115,000 stolen from you in order for the central planners to spend on their little pet projects having to do with various other of their priorities means that you didn’t have that money to invest yourself. And investments would yield far far more than 3 times that money, too. So the claims that people are now “getting back more than they put into the system” ring mighty hollow once one recognizes that the money would have grown far far larger under individual investment than the paltry amount they’re going to get out of the system unless they die first.
So it’s not “the elderly” at all who are causing the problems—it’s the people who stole their money and created the national ponzi scheme in order to fund their other little pet central planning projects.
The way I think the Medicare/SS budget problems could be resolved is as follows:
—recognize that the central planning leaders simply will never spend money wisely—nor will they actually spend the money on what they claimed it was originally for—so the less money they have available to spend on whatever pet projects they’re interested in, the better
—recognize that we owe the elderly their Medicare/SS since they had their money stripped from their paychecks ostensibly to fund the Ponzi schemes, but in reality to simply have more lucre to fund the central planning leaders’ projects
—pay all those 65 and older their SS/Medicare benefits—they [rather mistakenly] planned their retirements based on those benefits and their money was taken from them by the State ostensibly for that purpose
—for those between 45 and 55 years old, raise the retirement age to 75 immediately—they have between 10 and 20 years to prepare for that—so it’s doable—people live far far longer and more productively than they did back when the SS retirement age was established and 75 is quite reasonable
—all those under 45 get to go ahead and designate the money that the central planning leaders are stripping from their paychecks to whatever 401K or IRA or other recognized investment plan they please
July 31, 12:54 pm | [comment link]
20. Bookworm(God keep Snarkster) wrote:
Sarah, that is also an accurate, thoughtful, and 4.0 comment.
July 31, 11:46 pm | [comment link]