Look, it’s important to recognize that we face an unsustainable budget outlook. The two key points are 1) in the medium term—over the next decade–we can’t bring down the deficit without new tax revenues (in the very near term, we temporarily need larger budget deficits to help complete the recovery from the great recession). Spending cuts alone won’t work. And 2) in the long term, we must slow the growth of health care spending.
I’m not saying either of these imperatives are a piece of cake, but them’s the facts and pretty much all else is noise.
Like this. It’s one of those pieces that throws around big numbers to scare the heck out of you, with no context to understand them.
In fiscal 2011, the cost of the promises [of Medicare and Social Security] grew from $30.9 trillion to $33.8 trillion. To put that in context, consider that the total value of companies traded on U.S. stock markets is $13.1 trillion, based on the Wilshire 5000 index, and the value of the equity in U.S. taxpayers’ homes, according to Freddie Mac, is $6.2 trillion.
OK. Forget that you’re comparing a 75-year obligation with point-in-time values. Forget that you’re squishing together Social Security and Medicare, when the pressures on the two systems are very different, with Mcare a much tougher problem. And forget that it’s not even a Medicare problem we face per se—it’s an economy-wide health care spending problem—in fact, cost control is considerably worse in the private sector.
The thing that should immediately make you put such articles aside is the huge dollar figures with no reference to the rest of the economy, which we can also expect to grow a bit over the next 75 years. In fact, as a share of GDP, that $33.8 trillion shortfall amounts to less than 4%. The Social Security part comes to 1%.
These shares were in the same table (Table 8) as the dollars, but I guess the thinking is that 4% isn’t scary enough. For that matter, you could do the math and say, “of course, the net present value of cumulative GDP over this period will be $900 trillion” but I’m not sure that helps either.
Again, I’m not saying we should swim in de-Nile when it comes to these fiscal challenges. To the contrary, I’m saying that in order to realistically grasp the problem, we should avoid 75-year, or infinite horizon, calculations, especially those without regard to the overall growth we also expect to accrue over those years. Then we can start thinking solutions.
For example, the long-term shortfall in Social Security amounts to about 0.8% of GDP; that’s about the same magnitude of the highend part of the Bush tax cuts. Medicare’s far from bankrupt either, but cannot survive without major reforms, as discussed here. Some of these reforms are embedded in the Affordable Care Act, and we will have to see how effective they ultimately are. If they fail to deliver, we’ll need to try other measures…after all, every other advanced economy is way ahead of us in this regard, and there’s no reason we can’t achieve similar savings.
But we’ll never see clearly with all these huge, un-contextualized numbers bouncing around.