Tuesday, September 12, 2017

It Is Monday, And WaPo Bashes Social Security Again

What a surprise, the Washington Post is at it again, and it is the usual culprit, Robert J. Samuelson. Of course he has his attack buried under a title that appears to point more broadly, "The deficit is everybody's fault," although not if "everybody" includes people who die before they become eligible for Social Security and Medicare (and those parts of Medicaid that go to old people).  He even has further cover in that the new numbers come from the "left-leaning" Center on Budget and Policy Priorities in a report issued on Sept. 6 written by Paul van der Water, and I grant that the numbers he shows do come from that report, which makes projections out to 2035, the year when the adjustment for baby boomers going onto elderly entitlement programs will have been largely completed.

While in fact the report shows a slightly lower budget deficit as percent of GDP in 2035 than now (3.0% to 3.1%), that does involve a tax increase of 2.7% of GDP, along with cuts in spending on numerous categories of the budget.  These are in place to offset increases on four items: Social Security at the top of the list with an increase of 1.3% of GDP (from 4.9% to 6.2%), followed by Medicare with an increase of 1.2% (from 3.2% to 4.4%), interest on the national debt of 1.1% (from 1.3% to 2.4%), followed by "other health" (mostly Medicaid) of 0.5% (from 2.3% to 2.8%).  With maybe 60% of the latter not being due to more old people, and interest payments also not due to them, that leaves those aging baby boomers responsible for about 2.7%, just equal to the amount of the tax increase assumed to have the budget deficit decline by 0.1% of GDP, and although it is implied otherwise, some of that tax increase presumably would be paid by those elderly.

OK, I agree that old people will increase as a percentage of the population.  The number that appears in the CBPP report shows them rising as a percentage of the population from 15% today to about 20% in 2035, an increase of a third, or 33 and 1/3%.  But the increase in Social Security spending is only a 26% increase, not as much as the increase in the share of old people in the population. The underlying report notes that indeed cuts in Social Security spending already passed will be responsible for this gap, but Samuelson somehow does not note this, and calls for more cuts.  It is the one item he specifically mentions.

However, two of the other three items are projected to increase by more than the rate of increase of the elderly population.  Medicaid is to increase by 37.5% (3/8), an extra 4.5% beyond the population increase and interest on the national debt is to increase by a whopping 84.6%.   Only "other health" to increase by less at 21.7%. In the underlying report slight lip service is given to reining in rising overall medical care costs, but this is largely shoved aside by noting that new techniques will probably cost a lot (far from certain) and that there will be more super old, above 85 years, who really cost a lot.  But, as Dean Baker and others have relentlessly pointed out, we already spend way more than other nations on health care.  At a minimum a serious reining in of future increases ought to be very high on the agenda for the US.  This remains an obvious way to go.

As for the increase in the interest payments, the report does take this projection from a CBO estimate, and so I am not going to say that van der Water is cooking up some unreasonable number.  But this also depends on something else, future Federal Reserve policy.  It is true the Fed has been talking a lot about interest rate increases, but in fact they have delivered much less on that front than they have talked about, and with not that much increase in national debt as a percentage of the GDP projected, it would not take all that much restraint to reduce the increase due to this number.

As it is, as usual, Samuelson says nothing about reducing the interest rate increase number and nothing about reducing the rate of overall health care cost increases.  His only proposal is his usual one, to make further reductions in increased per capita Social Security payments as a percent of GDP beyond those already cooked into the books, although he does not recognize or admit that this is what he is doing.  But then, we have seen this before from him repeatedly, so this is not a surprise.

Barkley Rosser





6 comments:

ProGrowthLiberal said...

"I agree that old people will increase as a percentage of the population."

Which was known per the forecasts back in 1983 that were part of the analysis that led to the current Soc. Sec. system. The two factors that moved the magic date up to 2035 were rising inequality and the Great Recession.

ProGrowthLiberal said...

I found his oped and now I'm kicking myself for reading it. Just one line:

"As I have written countless times, the semi-automatic expansion of programs for the elderly (mainly Social Security, Medicare and long-term care under Medicaid) is slowly crowding out many other government programs, from defense to the Centers for Disease Control and Prevention."

We spend too little on "defense"? Excuse me? Of course he is projecting defense spending will fall from 3.2% of GDP in 2016 to 2.6%. I kinda doubt Trump is planning on letting defense spending to be crowded out. But I also checked with www.bea.gov which puts defense spending at $730 billion per year. That is 3.9% of GDP not 3.2%.

I guess I will let others fact check the rest of this awful oped. His claim about defense spending as a share of GDP should have gotten the editors of the Washington Post to ban him forever from publishing such intellectual garbage.

Barkley Rosser said...

Yes, there is a lot of junk it RJS's piece. But I do note that for better or worse the projections are not his but taken from the CPBB report, for better or worse, debatable as many items are. Again, what really sticks out, even though there are other items rising more in percent terms than SocSec, that is the only one RJS proposes anything specific to do about, of course another cut in benefits, not a tax increase, in particular another increase in the retirement age by one year.

Don Coffin said...

I can't get to the WaPo piece--it's paywalled, and I have hit my "free" article imit. But it seems he's also not broaching the possibility of higher tax rates on higher income people (which, depending on how one defines "higher income people, "probably includes me. I would, incidentally, be OK with that.

rosserjb@jmu.edu said...

Don,

The underlying report did include a tax increase, unspecified as to details other than amount as a percent of GDP, as well as supposedly some assumption of lowering of the rate of increase in health care costs for unspecified reasons. RJS noted these points but said nothing more about them. As it was the underlying report did end up with the budget deficit being slightly lower then than it is today, but with the tax increase doing the heavy work, which RJS clearly disapproves of. It should be those darned Social Security recipients taking lower benefits, shame on them.

Sanjay Lod said...

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https://youtu.be/eeRp5jT8go0