Medicare and Social Security

Since it was a Krugzilla column about the Republican plan to drastically cut Medicare and Social Security benefits, I'll let the Krug answer the people who say "But we have to cut these programs, we can't afford them, what are the Democrats going to do about it?" Here's your gift link. By all means do read, but let me summarize the main points. 

First, regarding Social Security, the rise in cost resulting from the Baby Boomers retiring and the general aging of the population will actually be pretty modest, from about 4.9% of GDP today to 6.4% in 2052, according to CBO projections. And that's assuming that life expectancy after retirement will continue to rise, which is not necessarily going to be the case. (In fact thanks to Covid, it recently fell.) In any case, people are tending to work longer, and either delay taking Social Security or paying into the system for longer, even without any policy changes. And the additional money can easily be found just by lifting the cap on income subject to the FICA tax. So that really is not a problem, unless you make $400,000 a year and don't want to pay taxes. Tough shit for you.

Medicare expenditures are expected to grow by more, but that's because of projected increases in health care costs, not the aging of the population. But the decades long trend of rising health care costs actually leveled off around 2010, and that has made all the doomsday predictions ring hollow. We do spend more than other wealthy countries on health care, and we get less for it. That's where we need to put our attention, not on cutting benefits or raising the eligibility age for Medicare, but on getting costs down to where they should be. We've already made a start by letting Medicare negotiate drug prices. We can accomplish more by taking the profit motive out of medicine and not doing ineffective or low value procedures. Or, as the Krugster puts it:

Anyway, C.B.O. projections now show social insurance spending as a percentage of G.D.P. eventually rising by about 5 points, which is still a lot but not unimaginably large. And here’s the thing: Half of that is still the assumed rise in health care costs. And there are things we can do to control costs that don’t involve cutting off Americans’ benefits. Bear in mind both that U.S. health care is far more expensive than that of any other nation — without delivering better results — and that since 2010 we’ve already done quite a lot to “bend the curve.” It’s not at all hard to imagine that improving the incentives to focus on medically effective care could limit cost growth to well below what the C.B.O. is projecting, even now.

 

Louise Sheiner of the Brookings Institution also discusses the issues.  She basically says, prediction is hard, especially about the future, but we don't need to panic:

I think the people who do the projections are trying to be balanced. Things may not be as bad as they predict, but they may be worse, right? I think a hard question is: What do you do when your policy has a lot of uncertainty? And people have different views on that. One approach is you should prepare for the worst-case scenario. Another is, no, let’s not cut benefits just because we think we might be in trouble in the future. I think I’m somewhere in between, which is: There’s a lot of uncertainty, so I would like to protect benefits, especially for lower-income people. I think there’s a lot we can do on the tax side. And figuring out a way to make the health system more efficient would have huge benefits all around. It would help people; it would help the budget; it’s a big deal. That should be a high priority.

 So that's it. We can preserve these popular and necessary programs without a lot of pain. So let's do it.