The Return of the Granny Bashers: More Attacks on Social Security and Medicare
By Dean Baker
t r u t h o u t | Perspective
Monday 05 May 2008
Last month, a bipartisan group of prominent budget experts had a press event
at the Brookings Institution where they argued that Congress had to make major
cuts in Social Security, Medicare and Medicaid. They claimed large cuts in these
programs were necessary in order to prevent the explosion in the budget deficit
that is projected if these programs stay on their current course.
While these experts are right to point to the long-term fiscal problems facing
the country, the real problem is not the budget and these key programs on which
tens of millions of people depend. The real problem is the United States has
a broken health care system, which is projected to get progressively more inefficient
through time.
Since roughly half of the country's health care costs are paid by the government,
primarily through Medicare and Medicaid, the projected explosion in health care
costs is also projected to lead to an explosion in government spending. If the
health care system is never fixed, the burden on the budget will eventually
be unsustainable, with annual deficits running into the trillions of dollars,
exactly as the Brookings contingent claimed.
However, it is crucial the public recognize that the problem is health care
costs, not a growing population of elderly. The two issues are easily confused,
especially since most public sector health care costs go to provide health care
for the elderly. The projected increase in the ratio of retirees to workers
will impose a strain on the budget, but it will not be qualitatively different
than the strain that aging has imposed in prior decades.
The country has always been aging - we are living longer - we can easily cover
the cost of a growing population of retirees as long as the economy is healthy.
With normal productivity and wage growth, our children and grandchildren will
be able to support a larger population of retirees and still enjoy a better
standard of living than we do; just as most of us now enjoy a better standard
of living than our grandparents, even though we support a much larger number
of retirees than they did in their working years.
However, if health care costs follow the projected trajectory, then the cost
of Medicare, Medicaid, and other government health care programs will be unsustainable.
Of course, in this scenario the rising cost of health care will also place an
enormous burden on the private sector.
Our per person health care costs are already more than twice as high as the
average in other wealthy countries like Germany, England and Canada. In the
projected scenario, per person health care costs will be four or five times
as high in the United States as in other countries by 2050. In this context,
US firms will face an enormous competitive disadvantage if they pay for their
workers' health care costs.
If the companies don't pay for insurance, then most workers will face an enormous
struggle paying for insurance costs that will be almost as high as the typical
wage of a worker today. In either case, workers will have far less money to
spend on food, housing, education, and other necessary expenses, if health care
costs grow as projected.
No one in the Brookings contingent would dispute the basic facts; we are all
looking at the same numbers. If health care costs in the United States were
brought in line with costs in other wealthy countries, all of which enjoy longer
life expectancies than we do, then we would not be looking at scary budget projections
20 or 30 years down the road.
This suggests the urgency of fixing the US health care system. Health care
reform is not only necessary to extend health care coverage to the uninsured,
it is also essential for preventing our health care system from strangling the
economy. Reform will require overcoming the opposition of extremely powerful
lobbies, such as the pharmaceutical and insurance industries, but there really
is no alternative.
As the Brookings contingent said, the current path is unsustainable. And it
is not acceptable to tell our parents and grandparents they will just have to
die because our health care system has made their care unaffordable.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.
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