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Wednesday, October 24, 2007

Entitlement Hysteria

Jonathan Chait tries to figure the periodic episodes of hysteria over Social Security:

Fear Factor, by Jonathan Chait, The New Republic: The beginning of the fall season brought to Washington another periodic upsurge of entitlement hysteria. ...  Affected parties tend to furrow their brows and scold politicians in particular, and Americans in general, for our myopia in the face of the demographic tidal wave of retiring baby boomers who will drown the federal budget with unsustainable benefits. ... Those afflicted with entitlement hysteria are identifiable not by the realization that big social programs will need a fix--which is widely understood-- but by the urgency and gravity of their pleas. ...

There's some truth to their analysis, but it misses the point in a crucial way. The two largest entitlement programs, Social Security and Medicare, are in very different shape. The Social Security Trust Fund is scheduled to last until 2042, at which point we'll have to hike up taxes or trim spending a bit. Medicare, on the other hand, faces a day of reckoning in 2019.

Yet one of the oddities of the entitlement hysterics is that they are far more obsessed with the minor problems of Social Security than with the massive problems of Medicare. Indeed, ... they inevitably follow the same pattern: They begin with an ominous summation about entitlements--thus lumping together Medicare with Social Security--then swiftly proceed to demand that Social Security be shored up forthwith.

Russert's recent harangue at the Democratic presidential debate was a classic example. He began by warning of the crisis faced by "Social Security and Medicare" but proceeded to ask no fewer than 14 questions about Social Security, and zero about Medicare. ...

Should they stop being hysterical about Social Security and start being hysterical about Medicare? Well, that would be a start, but it would still elide the deeper problem. The reason Medicare is in such worse shape than Social Security is that it has to account for exploding health care costs. Their focus on demographics and greedy baby boomers is entirely misplaced. Indeed, the "entitlement problem" is mostly--three-quarters, to be precise--a function of rising health care costs.

Since you can't solve the entitlement problem without solving the health care problem, one might think that the entitlement hysterics would have gradually moved on to becoming health care hysterics. ... Yet this is another puzzling thing about entitlement hysteria: the sheer persistence of the obsession. ...[W]hy do they consider this to be a matter of such unique urgency? Put aside the war in Iraq, for which plenty of people (including me) lack any confident solution. In addition to the health care crisis, there's global warming. There are numerous loosely secured nuclear sites throughout the world... There are numerous diseases threatening the lives of millions of Africans whose deaths could be prevented at relatively modest expense. ...

Compared to such disasters, the entitlement nightmare scenario isn't so nightmarish. If we do absolutely nothing to fix Social Security, then, 35 years from now, the program will have to start paying out three-quarters benefits, or we'll have to raise taxes. It's not ideal, but it doesn't keep me awake at night.

Yes, the fix would be easier and fairer if we implemented it sooner. But the closer we get to Social Security's insolvency date, the easier it will become politically to do the fix. The last major fix to Social Security, implemented in 1983, came about just as the Trust Fund was on the verge of insolvency. ...

Ten or 20 years ago, you could plausibly deem Social Security's finances among the most pressing national problems. Those who were willing to take on the problem were admired for their farsightedness, bipartisanship, and seriousness of purpose. Social Security's place on our list of national problems has long since been overtaken, but, among Washington establishment types who remember those days, the issue retains its totemic significance. Entitlement hysteria has become less a response to a crisis than an expression of statesmanship. ...

It's an ideological fight and Social Security is the battleground. Finances are (mis)used in an attempt to motivate change, anything to shake up the system, but among the more hysterical finances are not the real concern.

    Posted by on Wednesday, October 24, 2007 at 12:24 AM in Economics, Politics, Social Security | Permalink  TrackBack (0)  Comments (295)


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