Now we see the real struggle for the soul of this administration. Obama wants to tackle the insolvency of the big three entitlement programs: Medicare, Medicaid and Social Security. These three programs, especially Medicare, will destroy the fiscal future, unless we pare them back now. Left untouched, they will also make it much likelier in the near future that global financial markets may finally snap and stop sending money to a country that looks more and more like those subprime mortgage-owners than a serious polity. And so we have a tough-on-spending budget and a desire to convene the long-anticipated, endlessly delayed fiscal sanity summit to make the deal we all know needs to be made. The GOP will have to accept some tax hikes and the Dems will have to accept some entitlement cuts.
We're told, over and over, that there is some looming crises in Social Security and Medi-Care/Medi-Caid. Is it true? Well, there might be a problem in about 40 years.
Of course, it wouldn't be an Andrew Sullivan post if it did not make the assumption that the answer to every problem lies in mid-point of two "extremes";
The right therefore has an opening to appeal, for a change, to the sensible center.
So we get a two-for from Sullivan today. A perpetuation of the Entitlement myth, along with the conventional wisdom that there is no real different between Conservative and Progressive policy positions. They are both wrong, and the answer is always the "middle" choice.
Krugman explains it in simple terms.
We have an aging population, which will tend to increase the share of GDP spent on these programs. Looking ahead to circa 2050, we’ll go from about 3 workers per retiree to 2. This would, other things equal, raise spending on the programs by about 4 percentage points of GDP. (Not 4.5, because only part of Medicaid is age-related). That is, we’d spend 6.75 percent of GDP on retirement, 6.25 percent on health care.
Now, 4 percent of GDP is a lot, but not catastrophic: remember, the share of GDP spent by the government currently is 10 percentage points or more higher in a number of wealthy countries than it is here.
What makes the projections you actually see so scary is the assumption that “excess cost growth” in health care will continue — that is, health spending per person will continue to rise at close to 2 percent faster than GDP per capita. This means, circa 2050, that health care costs will be roughly double what pure demography would predict, adding another 6 plus percentage points to the entitlements projection. Looking beyond that, demography adds very little — it’s all health care.
Why are health care costs skyrocketing? Profit margins for the insurance companies.
If we really want to "fix" Social Security, all we need to do is expand Medi-Care over the next 40 years as a single payer health insurance. Even if that doesn't fix the issue entirely, rescinding the payroll tax cap and making it more progressive will generate enough revenue to continue the benefits at the same level as they are today.
What I don't understand is why some people seem hell bent on eliminating very popular social programs? It doesn't make any sense.
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