The most clear-eyed view of the silliness of the deficit commission report comes from Kevin Drum, who points out that at heart it says much less about reducing the size of the deficit than it does about reducing the size of the government. The distinction is a crucial one, since the mathematics of the deficit are simple, and overwhelmingly a function of Medicare expenditures. “Medicare, and healthcare in general, is a huge problem,” says Drum: “It is, in fact, our only real long-term spending problem.”
Medicare is a true fiscal nightmare. The population of the US is aging: the current Medicare enrollment of 47 million will soar to 71 million by 2025. Those people will be living longer, too, and their healthcare costs are certain to continue to rise not only faster than inflation, but also faster than the growth of the economy as a whole. So long as the U.S. commits to pay the healthcare costs of substantially everybody over the age of 65, nothing else really matters, in terms of the long-term fiscal deficit.
Here’s Drum:
Any serious long-term deficit plan will spend about 1% of its time on the discretionary budget, 1% on Social Security, and 98% on healthcare. Any proposal that doesn’t maintain approximately that ratio shouldn’t be considered serious. The Simpson-Bowles plan, conversely, goes into loving detail about cuts to the discretionary budget and Social Security but turns suddenly vague and cramped when it gets to Medicare. That’s not serious.
And here’s Matt Steinglass, commenting on Drum:
Mr Drum writes for a liberal magazine. And here he is saying that the main thing we need to do in order to restrain growth in the deficit and in government spending, which will otherwise bankrupt us, is to cut the biggest government entitlement programme, Medicare. Indeed, this is a bog-standard consensus position among American liberals… Shouldn’t this be shocking? Shouldn’t this be big news for our contrarian press? “Liberals Call for Cuts to Entitlements!” Aren’t we amazed that supposedly big-government liberals want to slash the projected Medicare budget?
The point here is that the deficit commission chairmen are doing everything in their power to perpetuate the intellectually dishonest meme that if we just pare enough excess from the government’s discretionary budget, that can somehow solve the problem of the soaring deficit. It can’t. Liberals like Drum recognize the problem, and can work out the mathematics of Medicare in public. The deficit commission, it seems, can’t.
One gets the feeling there is an unspoken agreement among the elite literati to eschew discussion of deficit solutions that would impact them, and concentrate on making sure the entire burden falls upon the middle and working class. The 1% of the time to address a projected Social Security shortfall would best be used by discussing just how much to raise the wage ceiling subject to payroll tax. That is NEVER discussed by the just barely rich.
#1 Posted by James, CJR on Thu 11 Nov 2010 at 11:20 PM
There's nothing crazy about a liberal claiming we have to do something about Medicare.
The fact of the matter is the cost of medicare is a function of the cost of healthcare which is far, far out of whack, as seen here:
http://blogs.ngm.com/blog_central/2009/12/the-cost-of-care.html
Paying double for outcomes and treatment frequencies that are a fraction of any other developed country does not a good economy make. More and more of total GDP is going to be sucked away by the inefficient health care system if nothing is done about it.
The medicare problem is magnified version of the general health care problem since the program takes on all the lemons of the health care economy, the elderly, the poor, and the disabled.
If you want to control the costs of the program, you have to open the program up to healthy consumers who will pay the premiums but not incur the chronic costs. You save money and reduce market inefficiency by expanding the pool of people covered. This was why the public option / single payer was pushed so hard by liberals. It's more humane and cheaper.
But we don't live in an environment where honed arguments and patience win the day.
http://www.dailykos.com/story/2009/12/16/815429/-No-One-Is-Going-To-Save-You-Fools
#2 Posted by Thimbles, CJR on Fri 12 Nov 2010 at 04:17 AM
Medicare does not enroll "the poor." Medicare is strictly for people who have reached their 65th birthday, and the permanently disabled with a one-year waiting period.
The "poor" are served by Medicaid, a completely separate program than Medicare. And Medicaid doesn't serve *all* poor people, only children and pregnant women. And it only serves children up to 135% poverty level (for 1-5 years of age) or 100% poverty (for children 6-18). CHIP, a completely separate program from Medicaid, serves children 135% poverty through 200-250% poverty level, depending on the state.
And neither Medicaid nor CHIP serves undocumented children or undocumented pregnant women of any age. And it doesn't serve US citizens that cannot prove their citizenship with certain types of documents.
(NOTE: Some states have expanded eligibility for CHIP from their own state funding streams. Some states have expanded eligibility for some urgent or catastrophic conditions in adults.Some states provide medical care and medicines for people with AIDS, and the federal government provides medical care for kidney dialysis patients.)
#3 Posted by James, CJR on Fri 12 Nov 2010 at 05:12 AM
Kevin Drum lumped the two together, as you can see from the CBO graph, so I did too.
But you're right.
#4 Posted by Thimbles, CJR on Fri 12 Nov 2010 at 05:55 AM
Yep. Too many bloggers and journalists pull opinions out of their butt on stuff they don't know anything about. Though Kevin Drum's basic point is right on. But I don't know why he lumps Medicaid with Medicare, and it would be more informative to separate the two programs, since they have completely different issues with respect to cost.
It would help the overall conversation if bloggers and journos spouting opinions got their basic facts right to start. Of course, on the right, that's a feature, not a bug.
#5 Posted by James, CJR on Fri 12 Nov 2010 at 07:15 AM
NOTE: I neglected to mention that a big portion of Medicaid dollars go to long-term care for the elderly. Not sure if that is a mandated function of Medicaid or if that is an expenditure under control of the individual states.
#6 Posted by James, CJR on Fri 12 Nov 2010 at 09:27 AM
I don't argue with the central imortance of Medicare in the deficit equation, but to claim that no meaningful cuts can be found in discretionary spending is myopia of a particularly American kind.
The "defense" budget is in discretionary spending, in fact it nowadays consumes the lion's share of discretionary spending. And that's just the acknowledged, admitted part of America's gargantuan military spending. Never mind all the additional costs like nukes (Dept of Energy), mercenaries (mostly State), the hidden, vast intelligence budgets (well over $100 Bn). Even this doesn't count VA expenditures and the vast annual interest payments on previous deficit-funded military spending (about 230 Bn a year).
America claims its military spending is about 3-4% of GDP (already twice the NATO average and nearly four times the Chinese proportion). But if you add up the real costs, it's probably over 8% of GDP. How can this be irrelevant or insignificant to the issue of the deficit?
Clearly it can't. It's not true that military spending is irrelevant to America's budget woes. The real problem is that military spending is a sacred cow even to many supposedly liberal Americans. Everyone either worships the military; or is terrified of being seen as wanting to cut it; or is actively pocketing their slice of the pork.
America could literally cut its military spending by 80% (yes eighty), and it would still be spending more than Russia and China combined. Yet US conventional wisdom (you know, the same wisdom that just knew Iraq had WMD) insists there's no room for cuts.
The same people who screamed bloody murder over the TARP pretend that even larger amounts being spent every year on the military are too small to make a difference to the deficit. In fact, the people who whine hardest about the deficit are typically those who most want to INCREASE military spending - which Obama is doing, by the way.
America continues to build up its military arms even as its economic legs are wasting away. It's going to end up looking like a wheelchair athlete. This is a classic symptom of empires in terminal decline.
China: military spending: claimed 1.2% of GDP, real c. 1.5%
US: military spending: claimed 3.8% of GDP, real c. 7-8%
China: economic growth: nearly 10% annually, even in the midst of a global recession
US: economic growth: negative last year, hasn't hit 4% in decades.
#7 Posted by OD, CJR on Wed 17 Nov 2010 at 11:44 AM