Medicare

The following table is derived from a graph (in the print edition)
which accompanied the article
“Campaign 2012 and the Truth about Medicare” by Veronique de Rugy
which appeared in the August 31, 2012 Washington Examiner
[Examiner, Mercatus].
The data is drawn from
the 2012 Trustees Report of the Centers for Medicare and Medicaid Services.
The dollar figures are in real (2012) dollars, i.e., adjusted for inflation.
The total cost did not appear in her graph,
but is obtained by simple multiplication
of the cost per enrollee by the number of enrollees.
(I have rounded the figures slightly more than in the original.)

Year	Medicare Enrollees (M = million)	Cost per Enrollee	Total Cost ($G = $billion)
1975	25M	$2,800	$70G
2011	49M	$11,500	$560G
2040	88M	$21,000	$1,840G

---

Miscellaneous Articles

2011

2011-01-03-WP-benefit-tax-gap

Analysis illustrates big gap between Medicare taxes and benefits
By Ricardo Alonso-Zaldivar
Washington Post, 2011-01-03 (print edition)

2011-05-26-NYT-Redberg

Squandering Medicare’s Money
By RITA F. REDBERG
New York Times Op-Ed, 2011-05-26

Letter in response

2011-05-27-WP-Miller-Ryan

Wait! Paul Ryan has a point
by Matt Miller
Washington Post Op-Ed, 2011-05-27

2011-06-05-WP-Samuelson-why-we-must-end-medicare-as-we-know-it

Why we must end Medicare ‘as we know it’
By Robert J. Samuelson
Washington Post, 2011-06-05

...

It is only a slight exaggeration to say that

unless we end Medicare “as we know it,”
America “as we know it” will end.
Spiraling health spending
is the crux of our federal budget problem.
In 1965 — the year Congress created Medicare and Medicaid —
health spending was 2.6 percent of the budget.
In 2010, it was 26.5 percent.

The Obama administration estimates it will be 30.3 percent in 2016.
By contrast, defense spending is about 20 percent;
scientific research and development is 4 percent.

...

From 1970 to 2008,
Medicare spending per beneficiary increased
an average of 9 percent annually.

2011-08-15-WP-Coburn-Medicare-cuts

Coburn’s cuts: Taking on Medicare and Medicaid
By Walter Pincus
Washington Post, 2011-08-15

Editor’s note: Sen. Tom Coburn (R-Okla.) released a plan in July that he said would achieve $9 trillion in deficit savings over the next decade. Here, we review parts of the proposal.

Coburn, a doctor, has some strong ideas about Medicare and Medicaid, which, he said, provide “health-care coverage for approximately one in five Americans and, along with Social Security, make up the backbone of the federal safety net.”

Among his proposals: raising the entry age for Medicare; means-testing beneficiary payments; raising some premiums for all seniors; increasing funding for investigating fraud and abuse of both systems; and freezing for 10 years the Medicare reimbursement rates for doctors.

Why such dramatic steps? Coburn agrees with the Congressional Budget Office that the dramatic growth of federal spending on health care is “the single greatest threat to budget stability.”

“Medicare and Medicaid consume one in five federal tax dollars,” according to Coburn, who adds, “Taxpayers lose an estimated $100 billion a year to waste, fraud and abuse in the two programs, which is the combined annual budget of three entire federal departments — Transportation, Homeland Security, and Housing and Urban Development.”

Coburn believes that the federal safety net for seniors should reflect that Americans are living longer than when the laws were enacted. He notes that when Medicare was passed in 1965, the average U.S. life span was 70.2 years, and today it is 77.9 years. For someone born in 2009, it’s expected to be 78.2.

That’s “a wonderful development,” he said, but adds, the increase “has significantly raised the costs of the overall program.” He wants to increase the Medicare eligibility age by two months every year. The starting point would be those born in 1949, who will be 65 in 2014, and go until the eligibility age hits 67. Those born in 1960 will be 67 in 2027. After that, eligibility would be indexed to life expectancy, rising a month every two years and reaching 69 by 2080.

That still would have the average person on Medicare for at least 10 years, double the coverage time expected when Medicare first passed. Such a change could save $124 billion, according to Coburn.

Coburn also suggests targeting Medicare assistance “to those who need it most.”

First, he knocks down the notion that its payroll tax funds the program. He shows that it covers only hospital expenses (Part A). Medicare premiums cover only 25 percent of doctor visits and treatments (Part B). The rest is “subsidized through general revenue tax dollars,” Coburn said.

Premiums in 2010 paid for 11 percent of the Medicare drug program (Part D) that passed during the George W. Bush administration; general tax revenue paid 83 percent. Through 2010, the program overall cost $214 billion.

Coburn says individuals making $150,000 or couples with incomes of $300,000 “should pay the full cost of their Medicare Part B and D coverage,” a step he said would save $21 billion over 10 years.

His most controversial proposal is to raise Medicare Part B premiums for everyone by 2 percent for the next five years so that they cover 35 percent of the overall program.

Coburn notes that when the measure was passed, premiums were to cover 50 percent of all costs, but they never rose above 25 percent. He projects the average cost for his increase would be $15 to $20 a month and implementation would save more than $241 billion over the next 10 years.

Another big saving could come from increasing oversight of both Medicare and Medicaid, where losses from fraud are estimated by analysts and law enforcement officials to run from 3 percent to 10 percent of health-care expenditures. That, Coburn says, could be about $230 billion “fraudulently diverted” from the $2.3 trillion system.

He noted that at a recent House hearing the deputy inspector general of the Department of Health and Human Services (HHS) said that public health-care programs are “attractive to organized crime because the penalties — if they are apprehended — are lower than penalties for many other criminal offenses.” His answer is to beef up investigations because every $1 given the HHS inspector general returns almost seven times that amount in fines or money saved.

On Medicaid, Coburn wants to transfer management authority from Washington, making the states responsible for providing care for certain populations but leaving them the flexibility to negotiate with providers and design benefit packages.

Coburn wants to create stability in the Medicare reimbursement fees to doctors, which are annually threatened with reductions as the cost of the program increases. It’s to meet that threat, which Congress regularly defers, that he wants the 10-year freeze on reinbursement levels. That step, Coburn said, would ensure “stability and predictability for physicians, enabling seniors to continue to access the care they need.”

2012

2012-05-31-WP-Lawrence-why-we-cant-afford-medicare

Clueless about Medicare
By Bryan R. Lawrence
Washington Post Op-Ed, 2012-05-31

Medicare may be the most sacred government program in the United States — even 76 percent of tea-party supporters oppose cuts to it, a McClatchy-Marist poll found in November. Given its central role in our fiscal challenges, it makes sense to examine why this program is so popular.

There are two key factors. First, retired Americans receive high-quality care but have virtually no idea what their Medicare benefits cost. The George W. Bush administration required Medicare to begin providing such information, but it is presented in a way that makes it hard to understand and is read only by people who request it. (The Medicare Web site even cautions that the “files are large so printing them is not recommended.”) While not every retiree takes the time to study the cost, almost all rely on the benefits.

Second, every working American has Medicare taxes deducted from each paycheck and has been told that the money is paid into a trust fund for his or her future benefits. It’s not surprising that Americans feel proprietary about Medicare — they believe that they have spent their working lives paying for their future benefits.

But those Medicare taxes, and interest on the program’s small trust fund, cover just 38 percent of the annual cost of the program’s benefits. Premiums paid by beneficiaries cover an additional 12 percent, but fully half of the program’s $549 billion cost last year was funded by federal income taxes on working Americans.

Put another way, Medicare is a transfer of wealth from younger to older Americans.

As long as the baby boomers were working and paying taxes, their large numbers made this transfer to their parents and grandparents affordable. But the boomers began to retire last year. In its 2011 annual report on the nation’s financial position — compiled in conjunction with the Office of Management and Budget — the U.S. Treasury described the federal government’s finances as unsustainable. Treasury Secretary Timothy Geithner, in testimony to Congress this year, cited the ballooning cost of the transfer inherent in Medicare as a key driver.

The net present value of the transfer — the amount that would have to be set aside today to fund Medicare’s future intergenerational promises — has grown to at least $25 trillion, as calculated by the Government Accountability Office. This number is buried in footnotes of the annual Treasury-OMB report and is so large (almost twice the $14 trillion value of all public U.S. companies) that it defies comprehension. It’s not surprising that Americans can’t relate the alarming cost of this transfer to their own lives.

But recent work by the Urban Institute calculates the amount of the transfer to an average retiree. An American man retiring in 2011 could expect to receive Medicare benefits worth $170,000 (in 2011 dollars). If he had worked from age 22 at the average U.S. wage each year, he would have paid Medicare taxes (plus interest) worth $60,000 (also in 2011 dollars). So the average male worker retiring in 2011 will receive benefits worth almost three times what he paid in. And the transfer to that retiree will be $110,000 from younger Americans, perhaps including his grandchildren.

If that average worker had a wife who didn’t work, she would receive $188,000 worth of benefits, despite having paid nothing in. So the couple’s benefits are six times what was paid in, or a $298,000 transfer from younger generations.

...

2012-08-24-WP-matt-miller-the-real-medicare-villain

The real Medicare villain
By Matt Miller
Washington Post Op-Ed, 2012-08-24

[This is really an excellent column.
Mr. Miller has been publishing excellent work.]

[1]
Republicans cry that President Obama
is raiding Medicare to fund a socialist health-care nightmare.
Democrats blast the GOP for
sticking grandma with vouchers
to wreck a program they’ve secretly loathed for decades.
Far be it from me to put the kibosh on all this drama,
but when it comes to the policy stakes,
such breathless charges are beside the point.

[2]
The real Medicare villain is not Barack Obama,
and it’s not even “evil” Paul Ryan.
The real villain is America’s medical-industrial complex —
and once you grasp this, everything changes.

[3]
The beginning of wisdom on Medicare’s future starts with
two things both parties say
but which can’t simultaneously be true.

[4]
The first is that
we spend much more on health care than any other advanced nation
yet get no better results.
The second claim —
implicit in the attacks on Obama’s $716 billion in “cuts”
or on Romney/Ryan’s heartless vouchers —
is that,
if we do much to slow the growth of health-care spending,
we’d hurt seniors’ access and quality of care.

[5]
As I’ve argued before, no matter how often and how loudly
interest groups and politicians scream this second claim,
it can’t be true if the first claim is a fact.
And U.S. health care’s inefficiency is indisputable.

...

2012-09-07-NYT-long-term-care-looms-as-rising-medicaid-cost

With Medicaid, Long-Term Care of Elderly Looms as a Rising Cost
By NINA BERNSTEIN
New York Times, 2012-09-07

Medicaid has long conjured up images of inner-city clinics jammed with poor families.
Its far less-visible role is as the only safety net for millions of middle-class people
whose needs for long-term care, at home or in a nursing home, outlast their resources.

With baby boomers and their parents living longer than ever,
few families can count on their own money to go the distance.

...

[The article concludes with these examples:]

[29]
Wendy James spent nine years and thousands of dollars struggling to keep her mother safe at home with her in Yonkers, in Westchester County.
Her big mistake, she says now, was not filing a Medicaid application sooner.

[30]
Her mother, Elaine, 76, formerly a secretary in a doctor’s office in Manhattan,
had to quit work when she developed symptoms of Alzheimer’s disease.
As the illness worsened, Ms. James’s father, now 80,
retired from his job in a department store to help care for his wife.
When she needed an adult day program in a nursing home, which rose to $2,400 a month,
the family paid out of pocket.
And Ms. James, 37, who works for a medical billing company,
paid up to $1,000 a month for her mother’s medications
when she hit her Medicare prescription “doughnut hole.”

[31]
A 2009 analysis by the Kaiser Family Foundation found that
direct, out-of-pocket spending by individuals and families
accounts for 22 percent of the $178 billion spent on nursing homes.

[32]
Mrs. James is now in a New Rochelle nursing home, where Medicaid pays the bill.
Her husband travels daily
to spoon-feed lunch to her
in the nursing home’s chaotic day room.
Ms. James feeds her mother every evening after work,
rubbing her cheek to remind her to swallow.

[I would respectfully question the wisdom, considering the country has limited resources and many needs,
of paying Medicare dollars to extend the life expectancy of someone whose mind is so far gone that they cannot remember to swallow the food that they have chewed.
Note by the remark in ¶ 30 that someone was paying up to $1,000 a month (that's over $30 a day!) just for medications for her.]

[33]
“I did what I had to do for her,” said Ms. James, the youngest of three siblings.
“She was the best mom before she got sick.”

2012-10-23-NYT-Pear-settlement-eases-rules-for-some-medicare-patients

Settlement Eases Rules for Some Medicare Patients
By ROBERT PEAR
New York Times, 2012-10-23

WASHINGTON —

Tens of thousands of people with chronic conditions and disabilities
may find it easier to qualify for Medicare coverage of
potentially costly home health care, skilled nursing home stays and outpatient therapy
under policy changes planned by the Obama administration.

[Only "tens of thousands"?
I bet this is a gross low-ball.
The real answer will be millions.
We shall see who is right.]

...

Neither she nor Medicare officials could say
how much the settlement might cost the government,
but the price of expanding such coverage
could be substantial.

[What an irresponsible bastard Obama turns out to be.
Committing future taxpayers to a new commitment
without even estimating the cost!
How anyone can vote for such an irresponsible bastard is beyond me.
Oh wait.
He's good for the PC community.
What do they care about fiscal responsibility?
Do you think Nancy Pelosi gives a **** about fiscal responsibility?
If so, are really in denial.
She turned down the Simpson/Bowles recommendations.]

2013

2013-01-14-WP-Lane-shining-a-light-on-medicare-payments

Shining a light on Medicare payments
by Charles Lane
Washington Post Op-Ed, 2013-01-14

[What Mr. Lane points out here is both highly significant and highly surprising.
I, and I am sure, many other people have wondered
just why per-capita, inflation-adjusted, Medicare benefits
have gone up so much.
I certainly thought the basic facts about
what Medicare is spending money on
would be known to those who specialize in covering such topics,
if not to me.
But Mr. Lane's article says that is not the case.
The emphasis is added, and also some comments.]

Now costing more than $500 billion per year,
Medicare is central to the United States’ fiscal predicament.
For this complicated problem,
there are many complicated proposed solutions.

But what if we try something simple, like journalism?

In essence, that is the argument that Dow Jones,
publisher of the Wall Street Journal,
is pressing in a federal court in Jacksonville, Fla.
Dow Jones is asking District Judge Marcia Morales Howard
to lift a 1979 court order that
exempted from the Freedom of Information Act
all provider-specific data on Medicare payments.
Arguments ended in August, and a ruling could come at any time.

Thanks to the 33-year-old injunction,
the press and the public cannot examine
the treatments individual physicians billed to Medicare
or — most important — how much Medicare paid for them.
Yet this is a matter of obvious public concern,
given that Medicare made $28.8 billion in improper payments in 2011,
according to a Government Accountability Office report last February.

Media coverage could be a powerful weapon against waste, fraud and abuse,
Dow Jones argues — plausibly, given the Journal’s recent work.

In 2009, Dow Jones and the nonprofit Center for Public Integrity
sued the Department of Health and Human Services
for access to its database of physician fee-for-service claims.
HHS resisted but ultimately agreed
to supply a small portion of its information
in return for a fee
and a promise not to reveal individual physicians’ names.

Even with those limitations,
the Journal produced articles in 2010 and 2011 documenting
many millions of dollars’ worth of
excessive spinal­fusion surgery,
questionable prostate-cancer treatments and
dubious billing for home health-care services.

More irregularities might turn up if all journalists
could comb through Medicare’s records using data-mining techniques.
And imagine how many irregularities would be deterred
if providers knew that they might be named and shamed.

Doctors, of course, see a threat to privacy —
theirs, not patients’,
since patients would not be identified no matter how a lawsuit turns out.
“Privately employed individuals have a substantial interest in
the privacy of their personal financial information,
including their income,”
the American Medical Association argued in its brief to the court.

[This really is a gray area.
Physicians may be in some sense privately-employed,
but when they are billing Medicare
they are expecting the public, i.e., the government,
to pay them.
In a sense, Medicare is then their employer.]

The doctors warn of “deleterious effects on the physician-patient relationship.”
One physician affidavit avers that
“it would undermine my ability to care for my patients
if they think that I might be prescribing” a particular therapy
“for the money rather than for their well-being.”
Public disclosure of Medicare billing
would increase such purported misconceptions,
because non-experts can’t interpret the data accurately,
the doctors claim.

How paternalistic can you get?
Information about doctors’ incentives
might in fact empower health-care consumers,
as it generally does in other markets.
Surely patients who got some of the 276 spinal fusions performed by a single Midwestern surgeon in 2008
would have wanted to know, as the Journal reported,
that the doctor received
more than $400,000 in payments from spine-device makers.

Privacy was the doctors’ argument in 1979,
when they first sought, and won,
a permanent injunction to stop a Carter administration plan
to disclose Medicare reimbursement data.

Though issued by a single Florida district court,
the injunction applied nationwide and can be lifted only if
the court that imposed it finds, in essence,
that times have changed.

[Interesting that it is Florida court,
where such a high percentage of the population receives Medicare benefits.]

They have:
Medicare cost a mere $37.4 billion in 1980.
For that reason alone, the nation’s interest in cost control today
far outweighs doctors’ interest in billing secrecy.
Sens. Charles Grassley (R-Iowa) and Ron Wyden (D-Ore.) agree
and have introduced legislation to overturn the injunction,
though their bill is moving slower than the Dow Jones lawsuit.

[Why is that?
Congress surely has an interest in controlling excessive Medicare spending.
But Congress seems highly reluctant to do much in that direction.
There often is a cry for transparency in many things which affect out lives.
Why is there not much of an outcry for transparency on
where the Medicare dollars go?]

In a way,
it’s too bad that Dow Jones framed its case
as a matter of fighting fraud.
It is indeed that.
But the vast majority of providers are honest.

Still, doctors’ resistance to disclosure illuminates
the mentality bred by a system of
open-ended public financing on the one hand and
private provision of fee-for-service care on the other.

The latter creates powerful incentives to exploit the former,
yet it is often legal to do so.
Congress can only partially counteract this design flaw
by limiting reimbursement rates and other expedients.
And while Medicare makes sense, sort of,
to those who must deal with it on a daily basis,
who knows how the public would react
if people could see, in detail,
how the system really works?

Fuller disclosure about Medicare could help curb abuses.
Even more important,
it might inform a debate about
why Medicare spending keeps rising
even when everyone does follow the rules.

[Mr. Lane really deserves commendation for raising this issue.
I wonder why all the liberals in the media have not.
Can it be that they really have no interest whatsoever in controlling spending
in the areas in which they, and their relatives and friends, make a profit?
Controlling defense spending and farm subsidies
seems the extent of their interest in cutting spending.
But, as I implied above, many of them and their circle
either work in or profit from spending on education and health care.
Seems to be a conflict of interest within the left wing classes,
between their responsibility (one would think) to control spending
and their desire to achieve a profit.
In the famous slogan of Washington leftists, they
"Do well by doing good."
But at the expense of the federal budget, the federal deficit, the federal debt,
and thus future generations, including their own children.]

Entitlements

2009

2009-02-23-WP-Kuttner

The Deficit Hawks' Attack on Our Entitlements
By Robert Kuttner
Washington Post Op-Ed, 2009-02-23

[This opinion piece seems to be a fount of mis- and dis-information,
sometimes deliberately distorting history to support its desired agenda.
An example from the article (emphasis is added):]

History provides a parallel.
At the end of World War II,
the public debt was about 120 percent of GDP --
about three times today’s ratio.
Yet
the heavily indebted wartime economy
stimulated a quarter-century postwar boom --
because all that debt went to
recapitalize American industry,
advance science and technology,
retrain our unemployed and put them to work.

[That isn’t entirely accurate.
Let’s look at two issues:

First, what did the government buy with the debt it incurred during WWII?
Answer: It paid for the greatest munitions buildup the world has ever seen,
making America in the eyes of some “The Arsenal of Democracy”.
(A nice easily accessible description of this is in
Paul Kennedy’s The Rise and Fall of Great Powers.)
At the end of WWII the U.S. had built, and that debt had paid for,
a gigantic 1200 ship navy,
a gigantic Army Air Force,
and acres of army items,
not to mention spending $2 billion, a large sum in those days,
to develop the atomic bomb.
Further, it paid for all the munitions (shells, bombs, bullets)
that were expended on the Axis powers to defeat them.
And it paid for the salaries of tens of millions of service members.

Second, what fueled the post-war American economic boom?
Well, look at the industrial and economic state of the rest of the world.
Germany and Japan had been bombed to a far-thee-well,
to destroy both their industrial base and their will to resist.
France had been fought over,
Russia had had much of its industry destroyed by the German invasion, and
China had also been fought over in a ten-year war with Japan.
American industry had very little competition
until those nations could get back on their feet.

Put this in a current context:
Who makes many of the manufactured products we buy today?
Germany, Japan, and China.
To really recreate the post-1945 situation for America,
we wouldn’t increase our public debt
and use the money to make the expenditures the left is so eager for,
we would build up our military
and bomb the bejabbers out of Germany, Japan, and China.
Boy, that’d take care of the competition.
Of course, even that would not resurrect
the specific demographic situation, cultural values, and social structure
which even Kuttner must admit
played a large part in America’s success throughout the twentieth century.

Back to Kuttner’s op-ed:]

Since the early 1980s, Peter G. Peterson has been warning that
future entitlement deficits would crash the economy.
Yet when the crash came,
the cause was not deficits
but wild speculation on Wall Street.

[What sophistry.
Can there only be one crash, and the speculation one was it?
Of course not.
The problems Peterson has warned us about are still out there,
still not addressed.]

2009-05-25-Samuelson

A 'Crisis' America Needs
By Robert J. Samuelson
Washington Post Op-Ed, 2009-05-25

[1]
When the trustees of Social Security and Medicare recently reported on
the economic status of these programs,
the news coverage was universally glum.
The recession had made everything worse.
“Social Security, Medicare Face Insolvency Sooner,”
headlined the Wall Street Journal.
Actually, these reports were good news.
Better would have been:
“Social Security, Medicare Risk Bankruptcy in 2010.”

[2]
It’s increasingly obvious that Congress and the president (regardless of the party in power)
will deal with the political stink bomb of an aging society
only if forced.
And the most plausible means of compulsion
would be for Social Security and Medicare to go bankrupt:
Trust funds run dry; promised benefits exceed dedicated payroll taxes.
The sooner this happens, the better.

[3]
That the programs will ultimately go bankrupt is clear from the trustees’ reports.
On Pages 201 and 202 of the Medicare report,
you will find the conclusive arithmetic:

Over the next 75 years,
Social Security and Medicare will cost an estimated $103.2 trillion,
while dedicated taxes and premiums will total only $57.4 trillion.
The gap is $45.8 trillion.

(All figures are converted to “today’s dollars.”)

[4]
The Medicare actuaries then note what happens
once the trust funds for Social Security and Medicare’s hospital insurance program
are depleted:
“No provision exists under current law
to address the projected [Medicare and Social Security] financial imbalances.
Once assets are exhausted,
expenditures cannot be made
except to the extent covered by ongoing tax receipts.”
Translation: Benefits would fall.

[5]
Social Security checks would shrink;
some Medicare bills wouldn’t be paid in full --
and the shortfalls would progressively worsen.
Retirees would scream.
Hospitals might shut.
No president or Congress would abide the outcry.
Even the threat of imminent bankruptcy would rouse them to action.
But restoring the programs’ solvency
would confront Congress and the White House with fundamental questions.

[6]

In 1940,
life expectancy at birth was 61.4 years for men, 65.7 for women;
by 2008,
the comparable figures were 75.4 and 80.

So: As health and longevity improve,
when should people stop working and be entitled
(from which comes “entitlement”)
to receive government retirement subsidies?
Stripped of politically pleasing euphemisms
(“social insurance,” “entitlements”),
that’s what Social Security and Medicare mainly are.
If so, how much should wealthier retirees be subsidized?

[7]
Or: How much should obligations to the old displace other national needs --
for, say, defense, education, research, transportation
or, more broadly, adequate family incomes?
In 1990, Medicare and Social Security
represented 28 percent of federal spending;
in 2019, their share will be almost 40 percent,
projects the Obama administration.
As this spending grows, pressures will intensify to raise taxes, increase budget deficits or cut other programs.
What’s the right balance between the past and the future?

[8]
Or:
How can the medical system be reorganized to improve care and restrain costs?
By some estimates,
a third of health-care spending may be unneeded or ineffective.

[9]
Unfortunately,
the Medicare and Social Security trust funds won’t be exhausted
until 2017 and 2037, respectively, by the latest projections.
Although these bankruptcy dates are moved up from last year’s estimates
(2019 for Medicare and 2041 for Social Security),
they’re still fairly distant.
Between now and then,
the drain on the rest of government will occur invisibly.
The inadequate trust funds will steadily diminish.
The government bonds in these trust accounts
will be presented to the Treasury for payment.
Those payments can be financed in only three ways:
bigger deficits, higher taxes or spending cuts.

[10]
But without a genuinely forcing event -- something requiring a response --
presidents and Congresses sidestep the underlying choices.
They profess concern, but their proposals are cosmetic, ineffectual or both. “We must save Social Security for the 21st century,” proclaimed Bill Clinton. “The system . . . on its current path, is headed toward bankruptcy,” warned George W. Bush. Now, Barack Obama seems to be reverting to this familiar form.

[11]
“What we have done is kicked this can down the road,” he told The Post. “We are now at the end of the road.” Great rhetoric -- but that’s all. Although no one expects Obama to have a grand blueprint after just four months, he has yet to signal even general support for needed policies: gradual increases in eligibility ages; gradual benefit reductions for wealthier retirees; a fundamental overhaul of Medicare. Indeed, Obama’s plans to expand government-paid health insurance might increase Medicare spending by aggravating medical inflation.

[12]
Like General Motors, we continue bad habits because we can -- temporarily. Procrastination is a bad policy. The longer changes are postponed, the more wrenching they will be. The hurt for retirees and taxpayers will only grow with time. Social Security last faced a forcing event in 1983, when a dwindling trust fund prodded Congress to make changes. The lesson: A “crisis” is just what we need.

2009-06-22-Samuelson

Welfare in a Bad Way
By Robert J. Samuelson
Washington Post Op-Ed, 2009-06-22

[1]
Raised in an individualistic culture, Americans dislike the concept of the “welfare state” and do not use the term. But make no mistake, the United States has a welfare state, and its future is precarious. The true significance of General Motors’ bankruptcy lies more with this welfare state than with the battered condition of American capitalism.

[2]
Broadly speaking, the U.S. welfare system divides into two parts -- the private, run by firms; and the public, provided by government. Both are besieged: private companies by competitive pressures; government by rising debt and taxes. GM exemplified the large corporation as private welfare state. In contracts with the United Auto Workers, GM promised high wages, lifetime employment, generous pensions and comprehensive health insurance. All this is ancient history: New workers get skimpier benefits.

[3]
As metaphor, GM’s bankruptcy marks the passage of this model. Companies still provide welfare benefits to attract and retain skilled workers. But these shelters against insecurity are growing flimsier. Career jobs remain, but lifetime job guarantees -- whether formal or informal -- are gone. Last year, about 50 percent of male workers ages 50 to 54 had been with the same employer at least 10 years; in 1983, that was 62 percent.

[4]
Health insurance and pensions tell similar stories. In 2007, employer-provided insurance covered 177 million Americans, 59.3 percent of the population; in 1999, coverage was 63.9 percent. Since 1980, companies have gradually moved from “defined benefit” to “defined contribution” pensions, notably 401(k)s. Defined benefit plans provided guaranteed monthly payments; defined contribution plans -- just putting money into a pot -- make workers responsible for managing retirement savings.

[5]
What most Americans identify as government “welfare” are payments to single mothers, food stamps and (perhaps) Medicaid, the federal-state health insurance program for the poor.

[6]
But that’s not the half of it. Since 1960, government has changed radically. Then, 52 percent of federal spending went for defense, 26 percent for “payments for individuals” -- the welfare state. By 2008, 61 percent consisted of “payments for individuals,” 21 percent for defense.

[7]
Social Security and Medicare -- programs for the elderly -- represented the biggest share: $1 trillion in 2008. Most Americans don’t consider these programs “welfare,” but they are. Benefits are paid mainly by present taxes; there’s little “saving” for future benefits; Congress can alter benefits whenever it wants. If that’s not welfare, what would be?

[8]
Pressures on private and public welfare won’t abate. The economic conditions that encouraged corporate welfare have long since vanished. In 1955, GM, Ford and Chrysler accounted for 95 percent of U.S. light vehicle sales, reports economist Thomas Klier of the Chicago Federal Reserve. With market dominance and technological leadership, the Big Three assumed they could pass along to customers the costs of job guarantees, high wages and fringe benefits.

[9]
Eager to defuse the class warfare of the 1930s -- and to avoid unionization -- many U.S. companies imitated the model. They, too, believed that competition would be limited and technological change could be controlled. These conceits are gone (in 2008, the Big Three’s market share was 48 percent and dropping). Now, companies are hypersensitive to competitive and economic threats. A survey of 141 companies by Watson Wyatt consultants found that 72 percent recently cut jobs, 21 percent reduced salaries and 22 percent curtailed matching 401(k) contributions.

[10]
In theory, expanding public welfare could offset eroding private welfare. President Obama’s health-care proposal reflects that logic. The trouble is that the public sector also faces enormous cost pressures, driven by an aging population and rising health costs. The Congressional Budget Office projects the federal debt will double as a share of the economy (gross domestic product) to 82 percent of GDP by 2019.

[11]
Any sober examination of figures like these suggests that the system has promised more than it can realistically deliver. We are borrowing not to finance investment in the future but to pay for today’s welfare -- present consumption. Sooner or later, the huge debt will weaken the economy. Nor would paying for all promised benefits with higher taxes be desirable. Big increases in either debt or taxes risk depressing economic growth, making it harder yet to pay promised benefits.

[12]
The U.S. welfare state is weakening; insecurity is rising. The sensible thing would be to decide which forms of public welfare are needed to protect the vulnerable and to begin paring others. Our inaction poses another dreary parallel with GM. It was obvious a quarter-century ago that GM the auto company could not support GM the welfare state. But the union wouldn’t surrender benefits, and the company acquiesced. Inertia prevailed, and the reckoning came.

[13]
The same cycle, repeated on a national scale with sums many multiples higher, would be correspondingly more fearsome.

2010

2010-05-10-Samuelson

The welfare state’s death spiral
By Robert J. Samuelson
Washington Post, 2010-05-10

[1]
What we’re seeing in Greece is
the death spiral of the welfare state.
This isn’t Greece’s problem alone,
and that’s why its crisis has rattled global stock markets
and threatens economic recovery.
Virtually every advanced nation, including the United States,
faces the same prospect.
Aging populations have been promised huge health and retirement benefits,
which countries haven’t fully covered with taxes.
The reckoning has arrived in Greece, but it awaits most wealthy societies.

[2]
Americans dislike the term “welfare state”
and substitute the bland word “entitlements.”
Vocabulary doesn’t alter the reality.
Countries cannot overspend and overborrow forever.
By delaying hard decisions about spending and taxes,
governments maneuver themselves into a cul-de-sac.
To be sure, Greece’s plight is usually described as a European crisis --
especially for the euro, the common money used by 16 countries --
and this is true.
But only to a point.

[3]
Euro coins and notes were introduced in 2002.
The currency clearly hasn’t lived up to its promises.
It was supposed to lubricate faster economic growth
by eliminating the cost and confusion
of constantly converting between national currencies.
More important, it would promote political unity.
With a common currency, people would feel “European.”
Their identities as Germans, Italians and Spaniards
would gradually blend into a continental identity.

[4]
None of this has happened.
Economic growth in the countries using the currency
averaged 2.1 percent annually from 1992 to 2001
and 1.7 percent from 2002 to 2008.
Multiple currencies were never a big obstacle to growth;
high taxes, pervasive regulations and generous subsidies were.
As for political unity, the euro is now dividing Europeans.
The Greeks are rioting.
The countries making $145 billion in loans to Greece --
particularly Germany --
resent the costs of the rescue.
A single currency could no more subsume national identities
than drinking Coke could make people American.
If other euro countries (Portugal, Spain, Italy) suffer Greece’s fate --
lose market confidence and can’t borrow at plausible rates --
there would be a wider crisis.

[5]
But the central cause is not the euro, even if it has meant
Greece can’t depreciate its own currency to ease the economic pain.

Budget deficits and debt are the real problems;
they stem from all the welfare benefits
(unemployment insurance, old-age assistance, health insurance)
provided by modern governments.

[6]
Countries everywhere already have high budget deficits,
aggravated by the recession.
Greece is exceptional only by degree.
In 2009, its budget deficit was 13.6 percent of its gross domestic product
(a measure of its economy);
its debt, the accumulation of past deficits, was 115 percent of GDP.
Spain’s deficit was 11.2 percent of GDP, its debt 53.2 percent;
Portugal’s figures were 9.4 percent and 76.8 percent.
Comparable figures for the United States -- calculated slightly differently --
were 9.9 percent and 53 percent.

[7]
There are no hard rules as to what’s excessive,
but financial markets -- the banks and investors that buy government bonds --
are obviously worried.
Aging populations make the outlook worse.
In Greece, the 65-and-over population is projected to go
from 18 percent of the total in 2005 to 25 percent in 2030.
For Spain, the increase is from 17 percent to 25 percent.

[8]
The welfare state’s death spiral is this:
Almost anything governments might do with their budgets
threatens to make matters worse
by slowing the economy or triggering a recession.
By allowing deficits to balloon,
they risk a financial crisis as investors one day -- no one knows when --
doubt governments’ ability to service their debts
and, as with Greece, refuse to lend except at exorbitant rates.
Cutting welfare benefits or raising taxes all would, at least temporarily,
weaken the economy.
Perversely, that would make paying the remaining benefits harder.

[9]
Greece illustrates the bind.
To gain loans from other European countries and the International Monetary Fund,
it embraced budget austerity.
Average pension benefits will be cut 11 percent;
wages for government workers will be cut 14 percent;
the basic rate for the value-added tax
will rise from 21 percent to 23 percent.
These measures will plunge Greece into a deep recession.
In 2009, unemployment was about 9 percent;
some economists expect it to peak near 19 percent.

[10]
If only a few countries faced these problems, the solution would be easy.
Unlucky countries would trim budgets and resume growth
by exporting to healthier nations.
But developed countries represent about half the world economy;
most have overcommitted welfare states.
They might defuse the dangers by gradually trimming future benefits
in a way that reassures financial markets.
In practice, they haven’t done that;
indeed, President Obama’s health program expands benefits.
What happens if all these countries are thrust into Greece’s situation?
One answer -- another worldwide economic collapse --
explains why dawdling is so risky.

2010-08-10-WP-Sloan-Social-Security-trust-fund-funny-money

Social Security, the trust fund and funny money
By Allan Sloan
Washington Post Opinion, 2010-08-10



There’s real money, then there’s funny money -- stuff that looks real but isn’t.

Today, let’s talk about one of the world’s biggest piles of funny money -- the $2.54 trillion Social Security trust fund. It matters now because Social Security revealed plans last week to tap the fund for $41 billion this year and will begin tapping it on a regular basis in less than five years.

This year’s cash deficit, the first since the early 1980s and the biggest ever, means the government will have to borrow money to redeem some of the Treasury securities in the trust fund. Even at a time when Uncle Sam is borrowing $1.5 trillion a year to keep his checks from bouncing, $41 billion is real money.

Here’s why the trust fund is funny money. Let’s say I begin taking Social Security when I hit the full retirement age of 66 later this year. Because its tax revenue is below its expenses, Social Security would have to cash in about $3,400 of its trust-fund Treasurys each month to get the money to pay my wife and me. The Treasury, in turn, would have to borrow $3,400 from investors to get the money to pay Social Security. The bottom line is that the government has to borrow money to pay me, regardless of how big the trust fund is.

It’s not surprising that Social Security is now running a negative cash flow -- I predicted a year ago that it was likely to happen this year, and wrote in February that it had happened.

Democrats, for the most part, say everything’s fine because the trust fund has a fat balance. Republicans, who were happy to have Social Security taxes subsidize tax cuts for 25 years, have suddenly developed a holier-than-thou fiscal rectitude. They’re both wrong -- the Democrats financially, the Republicans morally.

Let me show you in two different ways how useless the fund is. The first is a quote from the introduction to the 2009 Social Security trustees report, the second is the graphic by my Fortune colleague Robert Dominguez that accompanies this article.

Allen Smith, economics professor emeritus at Eastern Illinois University and author of “The Big Lie: How Our Government Hoodwinked the Public, Emptied the S.S. Trust Fund, and caused The Great Economic Collapse,” spotted the 2009 quote, and it is telling.

It says: , “Neither the redemption of trust fund bonds, nor interest paid on those bonds, provides any new net income to the Treasury, which must finance redemptions and interest payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.”

In other words, the trust fund is of no economic value.

This sentence wasn’t in the 2010 introduction, released last week. Treasury says that it stands by the statement but that the Social Security trustees decided not to include it this year because it reiterates the obvious.

Now, to the “Geithner bond,” which shows how easy (and useless) it would be for Treasury to stick as many bonds as needed into the trust fund, and then declare Social Security to be sound forever.

You know, of course, why this wouldn’t work -- at least, I hope you know. It’s because the U.S. government ultimately has to pay its bills with cash, not with its own IOUs. In the long run, you need cash -- real money -- not funny money. Other than being a send-up, this hypothetical Geithner trust-fund bond is no different than the Treasury bonds the trust fund owns, except that it carries a higher interest rate.

There are ways, even at this late hour, to begin turning the trust fund from funny money into real money without unduly stressing the government’s finances. (I’ve discussed them before, and will do so again, but not today.) Given that taxpayers are bailing out the most imprudent companies and people in the country, we damn well should bail out Social Security, the mainstay of low- and middle-income people.

But let’s not kid ourselves that a fat trust fund is the solution. When Social Security’s cash deficits begin running more than $100 billion a year within a decade, it’s going to take a lot of money to keep the checks coming. And it sure won’t be funny.

2011

2012

2012-08-16-WP-Lawrence-to-fix-medicare-and-social-security-look-to-singapore

To fix Medicare and Social Security, look to Singapore
By Bryan R. Lawrence
Washington Post Opinion, 2012-08-16

...

[4]
...
When Medicare was debated and enacted,
Paul Samuelson was America’s most influential economist.
He was an adviser to presidents Kennedy and Johnson,
author of the nation’s best-selling economics textbook
and a soon-to-be Nobel laureate.
In 1967, Samuelson wrote in Newsweek about
the funding mechanism for Medicare and Social Security:

“The beauty about social insurance is that it is actuarially unsound.
Everyone who reaches retirement age
is given benefit privileges that far exceed
anything he has paid in. . . .
Always there are more youths than old folks in a growing population.
More important,
with real incomes growing at some 3 per cent per year,
the taxable base upon which benefits rest in any period
are much greater than
the taxes paid historically by the generation now retired. . . .
A growing nation is the greatest Ponzi game ever contrived.”

[5]
But the baby boom was ending as Samuelson wrote those words.
Births per woman had fallen
from 3.7 in 1960 to 2.6 by 1967 and then to 1.8 by 1975.
By 1990, births were back to 2.0 per woman,
but the demographics of the next century had been determined:
The rapidly growing population
needed to make up for insufficient savings by each generation of Americans
was no more.

[6]
Anyone could see that this would mean trouble for Medicare and Social Security
when the boomers began to retire.
But our leaders chose to protect the programs rather than restructure them,
and they have used dubious accounting standards
to hide the burden placed on younger Americans.

[7]
China’s leaders made different choices.
[China's political system is male-dominated.]
With a one-child policy,
they could not rely on children to pay for their retirement.
Instead, they have designed a system much like Singapore’s:
The government makes few retirement promises,
and Chinese citizens save significant portions of their income —
the average household socked away 38 percent in 2010,
Bloomberg Businessweek reported,
compared with 3.9 percent for U.S. households.
Much of those savings are invested by China’s state-owned banks into U.S. Treasury bonds,
which our government sells to finance Americans’ retirements.

[8]
Of the $11.2 trillion of U.S. public debt —
this doesn’t count the $4.8 trillion held by our government,
largely in IOUs to itself for Social Security —
the Chinese own $1.2 trillion,
making them the largest holder of U.S. Treasurys after the Federal Reserve.

[9]
This situation is as dangerous as it is ironic.
The Treasury Department’s 2011 annual report shows
U.S. debt as a share of the economy (gross domestic product) rising —
to 125 percent of gross domestic product by 2042 and 287 percent by 2086 —
as retirement promises turn into cash outflows.
And if Medicare’s costs per beneficiary grow at historical rates,
as the Medicare trustees fear is likely,
the U.S. debt-to-GDP ratio will eventually exceed 500 percent.
Recall that Greece was pushed into crisis
with a debt-to-GDP ratio of 113 percent.

[10]
How long will foreign investors, who own half of outstanding Treasurys,
be willing to use their savings to finance our promises?
In December, the head of China’s sovereign wealth fund,
which invests $400 billion of his country’s savings,
criticized Europe’s welfare system in blunt terms,
saying that it induces “sloth, indolence.”
What do the Chinese think of our system?

[11]
In the States, the investment management firm Pimco, the largest private buyer of Treasurys,
said last month that
our retirement promises have “similar characteristics” to Bernie Madoff’s scheme
and predicted a Greek-like crisis if the system is not reformed.
Meanwhile,

the Federal Reserve bought 60 percent of Treasurys issued last year.
This rate of purchases cannot continue indefinitely.

[12]
Today’s leaders
did not design Medicare and Social Security as an intergenerational transfer,
and they did not choose the government’s misleading accounting standards.
But because these bad choices have not been corrected,
many Americans believe that a cut to Medicare or Social Security
is a confiscation of money they paid into a trust fund.
This misconception greatly complicates our politics.

[13]
The good news is that Americans know changes are needed.
And our health-care system can be reformed
to reduce the burden on our children.
We need better information to have this critical national discussion.

[14]
Will our leaders give us an honest accounting and discussion of our choices,
or will we have to wait for a debt crisis to force the issue?


[The author has given an honest evaluation of the economic situation;
let’s try and give an equally honest evaluation of the political situation,
in particular,
who is to blame for the situation he has so pointedly and accurately described.
It is the senior citizens who have so repeatedly and consistently
block voted based on the single issue
of who can protect their
unwarranted and unjustified income transfers from the young.
It is they who have kept the politicians,
who surely understand the situation and the problem as well as anyone,
from doing the right thing.
We should also mention the media,
which has failed to point out consistently what a canard it is
that the senior citizens are just getting
the benefits which they contributed to when they were working.
(Although kudos to the Washington Post
for publishing this article and the previous ones by Lawrence,
and also the excellent columns by Robert Samuelson.)]

Social Security

Government web site: www.ssa.gov
Goverment history: www.ssa.gov/history
Government history FAQ: www.ssa.gov/history/hfaq.html


Of particular interest from the history FAQ is the following Q&A,
especially the first table cited, the Tax Rate Table:

---

Q16: Where can I find the history of the tax rates over the years
and the amount of earnings subject to Social Security taxes?

A:
The history of the tax rates is available as an Adobe PDF file.
(Tax rate table).
There is also a table showing the maximum amount of Social Security taxes
that could have been paid since the program began.

There are also tables showing the minimum and maximum Social Security benefit
for a retired worker who retires at age 62 and one who retires at age 65.

Also, there is a table showing the number of workers
paying into Social Security each year. (Covered workers table)
And also a table showing the ratio of covered workers to beneficiaries.
(Ratio table)

---

Note that
during the 1940s the tax rate to the employee was 1 percent,
during the 1950s under 2.5 percent
during the 1960s around 4 percent
during the 1970s around 6 percent
during the 1980s around 7 percent
finally reaching 7.65 percent in 1990.

---

Miscellaneous Articles

2011-10-30-WP-Social-Security-debt-negative

The debt fallout:
How Social Security went ‘cash negative’ earlier than expected
By Lori Montgomery
Washington Post, 2011-10-30

Last year, as a debate over the runaway national debt gathered steam in Washington, Social Security passed a treacherous milestone. It went “cash negative.”

For most of its 75-year history, the program had paid its own way through a dedicated stream of payroll taxes, even generating huge surpluses for the past two decades. But in 2010, under the strain of a recession that caused tax revenue to plummet, the cost of benefits outstripped tax collections for the first time since the early 1980s.

Now, Social Security is sucking money out of the Treasury. This year, it will add a projected $46 billion to the nation’s budget problems, according to projections by system trustees. Replacing cash lost to a one-year payroll tax holiday will require an additional $105 billion. If the payroll tax break is expanded next year, as President Obama has proposed, Social Security will need an extra $267 billion to pay promised benefits.

...

2011-11-07-Walker-Borders-Budget-battle-not-all-about-me

Budget battle is not all about me
By: David Walker and Lisa Borders
Washington Examiner Op-Ed, 2011-11-07

2012

2012-04-09-WP-Samuelson-would-roosevelt-recognize-todays-social-security

Would Roosevelt recognize today’s Social Security?
by Robert J. Samuelson
Washington Post Op-Ed, 2012-04-09

...

Early Social Security beneficiaries received huge windfalls.
A one-earner couple with average wages retiring at 65 in 1960
[i.e., born in 1895, with Social Security starting circa 1935]
received lifetime benefits equal to nearly 14 times their payroll taxes,
even if those taxes had been saved and invested (which they weren’t) ....

Although new recipients have paid payroll taxes higher and longer
than their predecessors,
their benefits still exceed taxes paid
even assuming (again, fictitiously) that they had been invested.
A two-earner couple with average wages retiring in 2010
would receive lifetime Social Security and Medicare benefits
worth $906,000 compared with taxes of $704,000 ....

2012-12-03-WP-Samuelson-whos-not-bargaining-in-good-faith

Who’s not bargaining in good faith?
By Robert J. Samuelson
Washington Post Op-Ed, 2012-12-02

[1]
Put Social Security on the table — clearly and irrevocably. Protecting retiree benefits is the left’s political equivalent of the right’s “no new taxes” pledge. Congressional Republicans are abandoning their untenable position. Now it is time for President Obama and congressional Democrats to do the same. As long as they don’t, they aren’t bargaining in good faith, or in the national interest.

[2]
Supporting retirees is now the federal government’s main activity. There’s a huge redistribution from young to old — a redistribution that will be made worse if retiree programs are largely excluded from deficit reduction, as many liberal groups urge. Either taxes will rise steeply or other federal programs (defense, food stamps, environmental protection) will be cut sharply. The young will pay more and get less. Or, given these unpalatable choices, true deficit reduction won’t happen.

[3]
Doubters should ponder the numbers. In fiscal 2012, non-interest federal spending totaled $3.251 trillion. Of that, $762 billion went for Social Security, $469 billion for Medicare (insurance for the 65 and over population) and $251 billion for Medicaid (insurance for the poor — two-thirds goes for long-term care for the aged and disabled). Altogether, that’s 46 percent of non-interest spending. Defense, $651 billion and declining, was 20 percent.

[4]
As baby boomers retire and health costs rise, this spending will mount. In 2010, there were 40 million Americans 65 and older. By 2020, that number is projected to be 55 million; by 2030, 72 million.

[5]
All these trends are old news; I have repeatedly written about them. If we had begun cutting benefits years ago, changes could have occurred slowly. People would have received ample notice. Now we lack the luxury of time. Benefit cuts will be unfair to retirees; but avoiding cuts will be unfair to the young. That we have arrived at this juncture indicts our democratic system and many Democratic politicians, who have obstructed constructive change in retiree programs. Obama continues this short-sighted tradition.

[6]
What could justify it?

[7]
One argument is that most elderly are poor; benefit cuts will further impoverish them. Not so. The Administration on Aging reports that in 2010, 25.9 percent of households headed by someone 65 or older had incomes exceeding $75,000; 19.4 percent had incomes from $50,000 to $74,999; and 18.8 percent had incomes from $35,000 to $49,999.

[8]
Another argument is that recipients “earned” benefits through their payroll taxes, which (many believe) were saved. But they weren’t saved; they paid the benefits of earlier retirees. Even had they been saved and earned interest, they typically wouldn’t cover lifetime Social Security and Medicare benefits, estimate the Urban Institute’s C. Eugene Steuerle and Caleb Quakenbush. A couple with average wages retiring in 2010 would receive $966,000 in benefits against taxes of $722,000.

[9]
Finally, it’s often said that Social Security — no one makes this argument for Medicare — doesn’t add to the budget deficit because benefits are still covered by payroll taxes. Again, not true. In 2010, benefits exceeded taxes and are expected to do so indefinitely. The Congressional Budget Office estimates the gap to average 10 percent over the next decade and to be 20 percent by 2030. This bloats deficits.

[10]
Democrats have made Social Security into government’s largest “earmark,” supposedly unrelated to deficits and the nation’s budget problems. Social Security should be excluded from any deficit negotiation, because it “does not add one penny to our debt,” as Senate Majority Whip Dick Durbin of Illinois said last week. Aside from being technically wrong (Social Security contributes to deficits), this view is philosophically bankrupt.

[11]
No genuine debate about government priorities can exclude its biggest program and those loosely associated with it, Medicare and Medicaid. The exemption isn’t progressive, because protecting retiree benefits will intensify pressures on the social safety net. The trick is to cut retiree benefits while minimizing the impact on the elderly poor. There are ways to do this: changing the benefit inflation-adjustment formula, fully taxing Social Security payments (affecting mostly the affluent elderly), gradually raising eligibility ages.

[12]
Deficit reduction should include higher taxes on the richest Americans. But there are practical limits. Already, Obama’s proposals would, in combination with state taxes, raise some top marginal tax rates to about 50 percent. As taxes rise, so do risks of adverse economic effects and more tax avoidance. Spending must be addressed. Government has other responsibilities besides sheltering the elderly.

[13]
By evading this, Obama flirts with failure. If Democrats won’t relinquish their sacred cows, Republicans will cling to theirs. We might go over the “fiscal cliff.” Or any budget package may be tiny. We need to acknowledge new social realities affecting the elderly (longer life expectancy, better health, greater affluence). Benefit cuts can be introduced over a few years to minimize the threat to the recovery. But we need to start. Now.