Futile Breast-Beating

Today we have our annual exercise in futile breast-beating following the release of the Social Security and Medicare actuaries’ report. The editors of the Washington Post declaim:

The sensible approach to this long-term challenge would be to close the gap between federal revenue and federal spending commitments. The way to do that is to legislate modest reforms to the entitlement programs along with higher taxes (including Social Security payroll taxes) for those most able to afford them. Unfortunately, Mr. Trump’s addition to Republican ideology was to commit the party to never doing either of those things.

while in the same publication Mitch Daniels pronounces:

So another congressional session is half over and, we’re told, is likely to go by without a mention of the moose on the American table, our preposterously out-of-control federal debt. It’s not as though the stakes are high: just our standard of living, national security, all the discretionary activities of government, and literally our future as an autonomous, self-governing people. Every honest observer knows what will cause the coming crunch, so aptly termed by Erskine Bowles as “the most predictable crisis in history”: the runaway autopilot programs we call “entitlements.” Without changes there, no combination of other measures can come close to preventing the reckoning.

Both the Social Security retirement program and Medicare have structural problems which can be delayed but not corrected by tinkering around the edges as both the editors and Sen. Daniels propose.

Social Security’s structural problem is not just that it is a “pay as you go” program, as pointed out by nearly everybody. It is that its assumptions are bad. It assumed that revenue and population would increase proportionally. That hasn’t happen. It’s a victim of income inequality. The only practical way to fix it is to stop paying it from its notional trust fund at all and pay it from general revenues. Any other solution is just kicking the can down the road.

To understand Medicare’s problems consider the graph above. Spending per recipient more than tripled from 1991 to 2010 and continues to increase. That’s about twice the general rate of inflation and an even greater multiple of non-healthcare inflation. That’s not a problem that can be solved by any solutions other than abolishing the program entirely or ending the present rate of increase. Shorter: there’s no painless way to solve Medicare’s problem so it won’t be done at all.