Ezra Klein: Social Security as Signifier

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May 15, 2007

Social Security as Signifier

Over at Hotline-On-Call, Marc Ambinder pats Obama on the back for becoming "the first top-tier Democratic presidential candidate to acknowledge that Social Security deficits could not, and would not, be solved without pain." He also links to MSNBC saying "Experts say that to shore up Social Security, you either have to raise the retirement age, raise taxes, cut some benefits, or some combination of the three." Oy.

It's odd how acutely concerned the nation's pundits seem to be with Social Security's finances. Here's what the outlook is like for some of the main drivers of federal spending:

Federal_program_growth

Look at that gentle slope for Social Security! You could do that in Rockports! Mt. Medicare and Medicaid, by contrast, require climbing gear. As the Center for Budget and Policy Priorities explains, "First, Medicare is by far the largest contributor to the overall growth in expenditures through 2050 because it bears the full brunt of both demographic changes and health care cost growth (and because it is a bigger part of the federal budget than Medicaid). Social Security contributes less to the growth in expenditures because it is not a health program — its per person costs do not grow faster than the economy." Seeking to restore fiscal stability by strengthening Social Security is akin to trying to cure cancer by treating nausea. It just ain't the problem. But because it's a cherished Democratic program, the press corps is quick to laud Democratic politicians willing to take it on. It's not the display of fiscal responsibility that excites the press, but the projection of independence. Which is fine, I just wish they were honest about it, rather than all this smoke and mirrors about Social Security.

May 15, 2007 in Charts | Permalink

Comments

Not to suggest healthcare reform isn't important or neccessary.

But why is it that revenue collection can't go to 28% if we need it to? The chart's title is a demonstration of its own built in assumption that federal revenues won't go up.

Posted by: ChrisB | May 15, 2007 9:11:35 AM

Which is fine

No, it's not fine. Republicans get lauded for their so-called independence when their rhetoric doesn't exactly match the Religious Right or the WSJ editorial page some of the time.

Democrats are only praised for their independence when they introduce or support actual legislation that attacks real programs and therefore will hurt real people.

I'm used to reporters not caring enough to know the facts, or to gloss over them as less important than the game. But Barack Obama is a US Senator running for President, presumably with access to all sorts of information and people in both his Senate office and campaign who can pull up the actual facts about Social Security on cue. Since the facts plainly show that Social Security is only in trouble from politicians such as himself, his statements about the program are disingenuous at best, outright lies more likely.

Posted by: Stephen | May 15, 2007 9:15:35 AM

I'm surprised more isn't being of the fact that Obama says he's open to raising taxes on the working poor. This to "fix" a system that ain't broken. Meanwhile, he's ruled out raising taxes on the rich beyond what they were in 2000. Does Obama think income inequality began with Bush?

So, we're been waiting for substantive differences between Edwards and Obama to crystalize. Here's one: Edwards is open to increasing taxes on the rich beyond what they were when Bush came in-as well as taxing oil companies for windfall profits--while Obama is open to raising taxes on the working poor.

Which do you prefer?

Posted by: davidmizner | May 15, 2007 9:15:48 AM

And that graph seems a bit odd with only the slight bump in Defense Spending. Are the authors of the graph expecting a post-Bush peace dividend and decline in Defense Spending?

Posted by: Tom - Daai Tou Laam | May 15, 2007 10:15:53 AM

This is smart by obama. He knows that a sizeable portion of the image conscious democrats are going to vote for him come what may. Ths gives him more room to appeal to saner democrats that clinton and edwards in particular are neglecting.

Posted by: henry hazlitt | May 15, 2007 10:36:35 AM

That graph is not at the link. Where does it come from?

Posted by: bloix | May 15, 2007 10:48:54 AM

Pathetic. We are all still living within the boundries of right wing approved thought

Posted by: Northern Observer | May 15, 2007 10:58:29 AM

Cumulative graphs suck.

Posted by: RickD | May 15, 2007 11:04:41 AM

bloix:

Go to the end of the article. Click on: "The full text of this report is posted to: http://www.cbpp.org/1-29-07bud.pdf." Then scroll to page 6 of the pdf file.

RickD:

I agree. Cumulative graphs are misleading, depending on how the data is stacked.

Posted by: Bruce | May 15, 2007 11:59:06 AM

Well, on reason for concern about Social Security might be that for most people, SS tax is their largest single tax.

Posted by: SamChevre | May 15, 2007 12:27:32 PM

You have to be very careful about such graphs. The slope of each program in this graph INCLUDES the slope of every program below it. Up until 2035, only SS and Medicare grow, and afterwards Medicare and Medicaid grow, and SS and everything else is constant. It would be far better to show the growth of each program individually as well as the overall budget.

Posted by: Eli Rabett | May 15, 2007 12:48:07 PM

Agreed, the first thing I noticed about your graph is that "Medicare" is the only category that changes much in thickness. (In fact "Defense" and "Other" thin out considerably post Bush)

Had you stacked Medicare on top, everything else would appear pretty much flat. The slopes are deceiving.

Posted by: Mikef | May 15, 2007 12:50:01 PM

I also think it would've been illustrative if the CBPP plot included the previous few decades for comparison.

I'm pretty sure that Defense has been the fastest growing expense under Bush, alone. They seem to think that that will stop. I'm not sure I agree.

Posted by: Mikef | May 15, 2007 12:55:51 PM

It has become accepted fact among the media elite that Social Security is in crisis. The Washington Post is particularly odious in this regard. Indeed, the state of things is so consistently misreported that younger people are often quoted as saying they don't expect to get anything from Social Security, which even in the worst case scenario would not be true, i.e. they would get approximately 80% of promised benefits.

The bottom line is that the program under normal growth scenarios can be preserved as it is without change. Even if growth is as sluggish as predicted in the Social Security Trustees' projections, the program remains fully solvent until 2041. The notion of needing to make immediate changes due to a contingency 34 years in the future is just silly. I have worked with pension plans for over twenty years and I can assure you that actuaries just don't have the ability to be that accurate that far down the road in a program as huge as this with as many economic and demographic changes as are likely to occur over the next couple of generations.

This is an ideological attack on a program that has been extraordinarily successful in promoting the independence and economic security of the elderly and the disabled. And it has done this with a level of administrative efficiency that is far superior to anything that the private sector can boast.

Don't buy the "need for sacrifice" bullshit on this one.

Posted by: Klein's Tiny Left Nut | May 15, 2007 1:05:51 PM

Obama has really turned into a big disappointment. His positions seem to increasingly look even to the right of Hillary. If these themes get pushed in the debates, I wonder what it does for him in the primaries? His support has seemed to decline a bit as his positions look more and more 'centrist'.

Posted by: Ricky | May 15, 2007 1:29:36 PM

Another reason to stay away from Obama. I'm not surprised. Any attack on Social Security, no matter how small, isn't centrist, it's caving to the radical Right who aim to destroy the program and will exploit any crack in the defense of it to do so. Nobody runnning for President as a Democrat should give any ground on SocSec. It's not a problem. There is no crisis. It's the most successful social program in the history of the country. Rinse and Repeat.

Posted by: eRobin | May 15, 2007 1:34:20 PM

I wouldn't jump all over Obama. What he *actually* said (and not Ambinder's interpretation of what he said) is very much in line with the graph posted by Ezra. Social Security is not in a crisis; the real problems are Medicare and Medicaid; some tweaks will ensure the stability of Social Security. This is from Obama's interview with Stephanopoulos:

"I don't want to lay out my preferences beforehand, but what I know is that Social Security is solvable. It is not as difficult a problem as we're going to have with Medicaid and Medicare."

The "let's get together" talk from Obama may be a little annoying, but the substance is not objectionable.

Posted by: anon | May 15, 2007 1:43:33 PM

Can someone explain to me why the Medicaid segment of the chart grows over time? Demographics should not impact it significantly since the dual-eligibles (i.e. the mostly-in-nursing-homes group that is either poor, or spent their life savings down on healthcare so that they became poor) now have most of their spending coming from the Medicare bucket, don't they? Is the suggestion that the CBPP expects there to be more poor people eligible for Medicaid in the future?

Posted by: Rick | May 15, 2007 2:09:13 PM

The notion of needing to make immediate changes due to a contingency 34 years in the future is just silly.

The Social Security reforms that passed in 1983 as a result of the Greenspan Commission report included a phased increase in the normal retirement age (then 65) to 67. The phase in would not even begin until 2003 and will not be completed until 2027 or 44 years after the legislation passed! The reason for the long phase in, of course, is to give people as much time as feasible to adjust their financial plans to reflect the rules changes.

To suggest that we don't have to do anything until the accounting balances in the Social Security Trust Fund reach zero in 2041 is both silly and irresponsible. Are you suggesting it is OK to just wait for the fund to run dry and then suddenly cut benefits by 27% or so to match incoming payroll taxes? Even the AARP recognizes that at least some program modifications and adjustments are needed. If we deal with them sooner rather than later, the tax increases and benefit cuts will not have to be as severe to put the program on a sound financial footing.

Medicare is, of course, a far bigger challenge, but I'll leave that discussion for another time.

Posted by: BC | May 15, 2007 2:12:29 PM

Where did Obama say he would raise taxes on the poor?

The easiest way to raise SS taxes is to raise or even eliminate the cap without changing the rate. If you eliminate the cap all together you could probably lower the rate, which would be a pretty nice tax cut for the working poor.

Posted by: Eric | May 15, 2007 2:14:06 PM

Rick,

Because medical costs are going up so fast. Medicare goes up steeply becasue of demographics and increases in medical costs. Medicaid goes up from the cost increases.

Posted by: Eric | May 15, 2007 2:16:31 PM

Confusing topic post and responses. What that Obama or even Ambinder said is wrong? The fact that Medicare and Medicaid are bigger problems doesn't entail that Social Security isn't also an important problem that needs to be dealt with sooner rather than later. And it will hurt. That's especially true if you don't buy the assumptions implicit in that graph that the projected benefits are sufficient.

Since the facts plainly show that Social Security is only in trouble from politicians such as himself, his statements about the program are disingenuous at best, outright lies more likely.

I'm stumped.

even in the worst case scenario would not be true, i.e. they would get approximately 80% of promised benefits.

And doesn't 80% of too little seem a bit of a problem? But that isn't the only problem. The projections that Social Security will remain "solvent" until 2041 are based on the money that has been borrowed from the fund being repaid by then. As I understand it, we aren't currently on track to do that; the rate of repayment (rather than further borrowing) required isn't currently budgeted. (That applies to some other liabilities as well.) That means taxes will have to be raised even to maintain the meager benefits we currently have, or possibly 80% of them.

Posted by: Sanpete | May 15, 2007 2:16:59 PM

BC,

What I am saying is that under more likely growth scenarios than the pessimistic ones being used today, there will not be any shortfall.

I am not advocating waiting until 2041 to see. I would suggest thought that getting within 10 to 15 years of that date makes a whole lot more sense. That is because the date of insolvency keeps getting slwoly pushed out and is likely to continue in that direction.

If you wanted to avoid cuts, but generate additional income to avoid possible insolvency, you could place a portion of the Trust Fund in the equity markets and let them grow over the next 30 plus years. Of course, this would mean an end to the Republican policy of using the surplus in Social Security to mask the huge deficits that the tax cuts (and the war) have caused. I don't think this is necessary, but it would be the logical approach if you actually think there is a problem.

Posted by: Klein's Tiny Left Nut | May 15, 2007 2:23:16 PM

"The projections that Social Security will remain "solvent" until 2041 are based on the money that has been borrowed from the fund being repaid by then...

"That means taxes will have to be raised even to maintain the meager benefits we currently have, or possibly 80% of them." ...Sanpete

Exactamundo. SS remains solvent only if the Trust Fund is repaid with increased taxes on the Elite. SS is not solvent, not safe, incredibly frigging politically difficult unless you think doubling the top quintile's marginal rates won't be a problem. AFAIK, only Mark Schmitt recognizes and accepts the political problem.

Class war. Obama chose his side. The hell with him.

Posted by: bob mcmanus | May 15, 2007 2:40:38 PM

"Are you suggesting it is OK to just wait for the fund to run dry and then suddenly cut benefits by 27% or so to match incoming payroll taxes?"

Yes, and in fact I quantified it. You can demonstrate that doing Nothing mathematically has been the optimum solution for each of the last 11 years.
http://bruceweb.blogspot.com/2006/05/cost-of-inactivity-nothing-as-plan-for.html

Second you have to realize that promised benefits in 2041 are 160% in real terms of the equivalent one today and by what some of us call Rosser's rule 75% of 160% = 120% relative to today. A cut to a better benefit than my Mom gets that is 34 years out doesn't seem like much of a tragedy.

Third Social Security is currently curing itself. Year in and year out shortfall and depletion get shoved out (there was some retrograde in 2005-2006 due to some one-time changes in assumptions). This can be seen in the following chart:
http://www.epinet.org/content.cfm/issueguides_socialsecurity_changes

Fourth the gap currently projected would call for a fix starting today of 1.95% of payroll. Not pleasant but for a worker making $20,000 only about a $1 day.

Fifth the No Economist Left Behind challenge of 2004 demonstrated that under standard Intermediate Cost assumptions private accounts wouldn't work anyway, the corollary being that growth that would make private accounts works saves the day anyway. After all anything above 2.0% productivity is all that is needed.

Nothing is a mathematically sound proven plan for addressing a crisis that the numbers suggest will never come.

All plans on the table suggest cutting my benefits for the entirety of my retirement (I'll be 84 in 2041) so as to let remaining retirees not suffer sticker shock. Friend that doesn't pencil out for just about anyone. So yep I propose the perfect plan given best available information in May 2007: Nothing.

Posted by: Bruce Webb | May 15, 2007 2:46:38 PM

To be fair, a lot of people, like Matt Y for instance, have talked about why increasing taxes, say from 17% of GDP to 21% of GDP, is economically feasible. Although I was very disappointed when Mark Thoma said increased taxes always cause decreased economic growth short-term. He is wrong. But few have been willing to look at the political difficulties of large tax increases in our current oligarchy of millionaire media and legislators.

In any case, the "top quintile" means what? I could look it up, but I think that includes any family over 80k annual income. That is where the money is, since the 90% top marginal rates won't happen. Doubling income taxes on over 100k. Are you ready for the class war? I doubt it.

SS and Medicare as middle-class entitlements are toast. They will be turned into welfare for the poor, then made block-grants, then corrupted into nothing in Mississippi and Texas. The Republicans won in Reagan's and Greenspan's first terms.

Posted by: bob mcmanus | May 15, 2007 2:54:39 PM

"Are you suggesting it is OK to just wait for the fund to run dry and then suddenly cut benefits by 27% or so to match incoming payroll taxes?"

"Fund to run dry?"

"Just meaningless pieces of paper". There is no Trust Fund unless it is repaid out of the General Fund.

It really is important, I think, to look at the SS Trust Fund as an unfunded Unified Budget obligation. Am I wrong?

Posted by: bob mcmanus | May 15, 2007 2:59:42 PM

Chicken Little is just a Fairy Tale

The actual dollar shortfalls after shortfall are not large, in constant dollars they start at $64 billion. The notion that this will trigger some huge tax increase is ludicrous, not to mention that in the context of this economy $64 billion is basically a pimple.

"Doubling the top marginal rate" Don't make me laugh. There is a reason why the only dollar figure privatizers ever use is Unfunded Liability over the Infinite Future Horizon. Because that is the only one that can be made to seem scary.

Take the time, examine the tables. Check the future dollar numbers in VI.F7 & VI.F8. Then check the economic assumptions in V.B1. Because if all you know about Social Security was learned by reading the MSM you probably don't know anything at all. Krugman excepted I have yet to see any of them who have actually engaged the data first hand.

List of tables 2007 Report
http://www.ssa.gov/OACT/TR/TR07/trLOT.html

We snapped our fingers and came up with $100 billion a year for the war. Does anyone really think this nation will come to some sort of crisis because we have to borrow $64 billion in 2017? Don't get buffaloed. If Schmitt really thinks this is a problem he needs to buy a calculater. Crisis is simply deliberately whipped up hysteria by people who want to kill Social Security. It does not survive encounter with the numbers.

Posted by: Bruce Webb | May 15, 2007 3:01:11 PM

The projections that Social Security will remain "solvent" until 2041 are based on the money that has been borrowed from the fund being repaid by then. As I understand it, we aren't currently on track to do that; the rate of repayment (rather than further borrowing) required isn't currently budgeted.

Sanpete – The Special Issue Treasury Bonds that are the assets of the Social Security Trust Fund would most likely be repaid by selling regular Treasury debt to public (including institutional and international) investors when we reach the point where incoming payroll taxes are not adequate to pay all benefits due in the current year. The net effect would be to increase the federal debt owned by the public (on which interest must be paid each year) and reduce (eventually to zero) the non-negotiable bonds owned by the Trust Fund which are credited with interest in an accounting sense but not paid interest in cash. Moreover, my understanding of the legislation is that the Social Security Administration can only pay benefits to the extent that there are "assets" (accounting balances attributable to the Special Purpose bonds plus credited interest) in the Trust Fund. Once the Trust Fund is exhausted, benefit payments cannot exceed payroll tax receipts from then current workers.

Ktln – If we opted to "invest" surplus payroll taxes in the stock market, I suspect that we would do it in a phantom way. For example, if there were, say, $100 billion of extra payroll taxes paid this year beyond what is needed for current year benefits, we would credit the Trust Fund with $100 billion of, probably, the S&P 500 Exchange Traded Fund (ticker: SPY) instead of depositing Special Purpose Treasuries which are non-negotiable.

Neither the bonds nor stock market investments as described here are real assets in the sense that they represent command over economic resources without selling real Treasury bonds to redeem them. They are, however, real assets in the sense that they represent a strong societal promise of benefits that is likely to be largely honored but subject to legislative changes in both taxes and benefits that will come with plenty of lead time to give people a chance to adjust their planning.

Posted by: BC | May 15, 2007 3:02:10 PM

So what are you saying, Bruce that we can just throw the SS Trust Funds Bonds away, tear them up, and there is no problem? Most of what I have read just casually assumed the Trust Fund would be repaid (somehow) or rolled over. If we don't need the Trust Fund, then why don't we simply reduce FICA?

Posted by: bob mcmanus | May 15, 2007 3:06:28 PM

"It really is important, I think, to look at the SS Trust Fund as an unfunded Unified Budget obligation. Am I wrong?"

You might well be wrong. Under Intermediate Cost assumptions you are right, under Low Cost assumptions mostly wrong, given trend productivity growth going forward totally wrong.

Under Low Cost (2.0% ultimate productivity) the Trust Fund principal never has to be paid back and only a fraction of the interest. Which is why the Trust Fund baloons to $78 trillion by 2085 (just that is a 't') in current dollars and $20 trillion in inflation adjusted constant dollars.
http://www.ssa.gov/OACT/TR/TR07/VI_OASDHI_dollars.html#wp150920

It really is worth the time to examine the implications of Figure II.D7. Tiny changes in input produce huge changes in output and outcome one looks more likely each year that passes.
http://www.ssa.gov/OACT/TR/TR07/II_project.html#wp106217
(You may need to scroll down from II.D4)

Posted by: Bruce Webb | May 15, 2007 3:14:35 PM

BC & Webb are typical of what I get from the "no crisis" crew.

"The net effect would be to increase the federal debt owned by the public (on which interest must be paid each year"

With what economic consequences, e.g., interest rates?

"They are, however, real assets in the sense that they represent a strong societal promise of benefits that is likely to be largely honored..."

Sez you.

Posted by: bob mcmanus | May 15, 2007 3:17:23 PM

BC,

I think to be effective you would actually have to invest real assets and treat them like an honest to goodness trust fund. I would say a gradual, non-market distorting entry into the Wilshire 5000 over time would make sense.

But I don't think this would be done because it would expose the true state of the budget in a way that would be politically unacceptable.

In the end, I don't think it is necessary, because I think Social Security is likely to remain solvent. But I think tax increases to deal with other aspects of the budget and Medicare/Medicaid are inevitable. There are plenty of ways in which this could be done without hurting the economy or the middle class.

Posted by: Klein's Tiny Left Nut | May 15, 2007 3:25:07 PM

Bob by 2009 my prediction is that we will be doing exactly that. We can't just tear up the Trust Fund, not yet, under Low Cost you still need to draw about 12% of the annual interest starting in 2023. But given sustained growth in the 2.2-2.3% range and it is likely we won't even need the interest.

I know it sounds crazy, that is what 24 years of Cato propaganda will do. And I mean that literally. In Fall 1983 they published a Social Security issue of the Cato Journal and outlined a propaganda campaign going forward. Particularly interesting is Butler and Germanis 'Achieving a Leninist Strategy'. It describes a process of gathering stakeholders in privatization and getting them to agree on a campaign to reassure retirees that their benefits were safe and to convince younger workers that Social Security simply wouldn't be there for them.

It is a brilliant marketing plan and was carried out to perfection. If they weren't so evil I'd take off my hat. I would say their market penetration went to above 99%. Now that is marketing. It makes interesting reading, every talking point privatizers use is laid out in black and white. Two plus decades ago.
http://www.cato.org/pubs/journal/cj3n2/cj3n2.html

None of this is random. There has been a 24 year long conserted assault on Social Security. Nothing secret about it, the plan is hidden in plain sight on Cato's webpage.

Posted by: Bruce Webb | May 15, 2007 3:28:30 PM

"With what economic consequences, e.g., interest rates?"

The dollar amounts are relatively small even under Intermediate Cost assumptions rising to about $400 billion dollars in 2041 (inflation adjusted) under Low Cost that number is about $165 billion in 2006 dollars. Given budget discipline on the General Fund side deficits of even $400 billion are endurable, we have had deficits at that level before. But I fully expect better numbers than 1.7% ultimate and pretty good hopes of numbers better than 2.0% ultimate and have yet to hear a coherent reason why those numbers are somehow unreachable.

Get us back to 3.0% plus like we were seeing before 2003 and Katy Bar the Door.

Bob it is all propaganda, trend growth brings us home, moreover without trend growth their stock models fail. If they really believe growth is going into the toilet and staying there forever, then fine. Just don't try selling me on stocks.

They are using two sets of books, one to produce crisis and another much more optimistic one to sell their solution. It is thoroughly dishonest and they know it. You can tell by the topics they avoid. Like productivity assumptions.

Posted by: Bruce Webb | May 15, 2007 3:42:53 PM

"Bob it is all propaganda, trend growth brings us home, moreover without trend growth their stock models fail."

Okay, I am listening and reading and trying to understand. I was aware of the Cato plan and the Greenspan disingenuousness of the early 80s.

a) If there is no crisis, then the early eighties and 1st term Bush was a simple, or not simple, transfer of government funding and wealth from workers to rentiers via the FICA increases. "Not so simple" because of the stock markets (P/E ratios)

b) More subtle and complex is a long term strategy of capital flight, moving brick-and-mortar capital to China and other developing nations. Again causing increased stock valuations while, and because of, reducing domestic costs. Upside is financing third world development. Downside is reducing real domestic tax base.

c) Politics is what makes economic forecasting impossible. When or if (or why) China dumps its dollar reserves is beyond prediction. I am totally unwilling to say: "SS is safe & secure for 75 years." Not after the last 30.

I will never feel sanguine about the security and comfort of workers and retirees until workers have real control over capital.

Posted by: bob mcmanus | May 15, 2007 4:00:23 PM

Obama chose his side.

What are you referring to, bob?

Bruce, I'm not sure I follow your analysis. According to the estimates I've seen, under the current assumptions, to solve the projected shortfall by raising taxes, we'd have to have about a 15% immediate hike in payroll taxes (a bit under 2 points), with that figure increasing each year we wait. You seem to be arguing that the assumptions are too pessimistic. On what basis? Do you think the SS actuaries are in league with the Cato institute?

As to increases in benefits, they are scheduled, but at a rate unlikely to track well with changing lifestyles.

BC, is it realistic to assume that we'll be able to sell enough new debt to pay the fund bonds without causing problems? Just as with taxes, there are effects from selling bonds, and in a context like this one, it seems to me that doing so would translate fairly directly into increased tax obligations to repay the bonds at some point.

Posted by: Sanpete | May 15, 2007 4:39:16 PM

Sanpete,

I'm not sure if it is realistic to sell the bonds to repay the Trust Fund without causing problems or not. Much will depend on the size of the economy, the availability of savings (worldwide), the perceived attractiveness of U.S. Treasury obligations relative to other investment alternatives, and the balance between federal tax revenue and other federal obligations at the time, among other things. At any rate, those who keep telling us that the system is sound until 2041 or thereabouts are making the assumption that the Special Purpose bonds plus accumulated interest will be redeemed to help finance benefits.

A two percentage point increase in the payroll tax is one of the options that could eliminate much of the projected funding gap, but with the effective rate of return on lifetime Social Security contributions already meager, especially for younger people, it will likely be a tough sell politically. As for eliminating the cap on wages to which FICA taxes apply, I think I remember even Bill Clinton opposing this idea when he was President. This is one of the most popular options in polls because most people know that it won't affect them. I think it's disingenuous to support higher taxes that only affect others. As for the working poor, the EITC was created to, in effect, rebate their payroll taxes and thereby enhance their incentive to work.

Even the AARP will tell you that any solution must strike a balance between higher taxes on workers, reduced benefits for future retirees, and some contribution from better off current retirees. Personally, I think higher taxes on capital gains and dividends should also be part of the mix as well, and yes, that would mean higher taxes for me.

Posted by: BC | May 15, 2007 7:36:49 PM

Good job, Ezra. You have shown that Medicare growth is largest contributor to Federal spending being "unsustainable." Shouldn't that give someone pause before they propose enrolling everyone in "Medicare-for-all?"

Posted by: umbrelladoc | May 15, 2007 7:59:49 PM

Shouldn't that give someone pause before they propose enrolling everyone in "Medicare-for-all?"

Wouldn't the new includees be younger, healthier, and therefore more likely to put more in than to take out?

Aren't private insurers always keen to cherry-pick customers that fit this profile?

Posted by: Davis. X. Machina | May 15, 2007 11:57:51 PM

I think it is enuff said that the big Bush donors are migrating to Obama and Hillary.

Pleasant appealing politicians, corporate friendly, don't undo most of the Bush legacy, in any other country moderate-right.

Posted by: Gary Denton | May 16, 2007 5:03:02 AM

Davis:
"Wouldn't the new includees be younger, healthier, and therefore more likely to put more in than to take out?"

No, Davis, the young and the healthy already pay for Medicare right now through taxes. Putting them into to Medicare does not change the fact that it is going to cost a lot more down the line. It only makes raising taxes on younger folks easier to sell because it will be for their own health care as well as the elderly.

Posted by: umbrelladoc | May 16, 2007 11:45:34 AM

umbrelladoc,

The young are paying for Medicare and private insurance now (both directly and by their employers) part of enrolling everyone in Medicare would be shifting that money from private insurance into Medicare as well.

Posted by: Eric | May 16, 2007 4:29:20 PM

Eric, I get that. There will be some initial savings as the administrative costs are lowered and private sector insurance profits are eliminated for the younger workers, and we can use that savings to help pay for the elderly. But that does not change the fact that health care spending will continue to increase as a percentage of GDP because of demographic trends.

Posted by: umbrelladoc | May 16, 2007 5:28:05 PM

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