Robert Samuelson’s column this evening in the Washington Post has a deliberately provocative title: Why are we in this debt fix? It’s the elderly, stupid.
I’d say it’s a must-read for people who really want to understand the federal debt.
Before I quote from it, a few remarks:
There are obviously many reasons why the U.S. has so much debt. The country has run deficits for most of the last 40 years and only was running surpluses for a few years at the end of the Clinton administration. Those surpluses evaporated almost immediately with the 2001 recession, the early Bush tax cuts, and the beginning of the war in Afghanistan.
It’s always worth drawing clear distinctions between Social Security, which only needs relatively minor tweaking to be sustainable over the long term, and Medicare, which on the current trajectory will have costs spiraling upward as health care expenses outpace inflation and the nation ages.
And check out this data that accompanied a piece by the NYT’s David Leonhardt: Generational Divide Colors Debate Over Medicare’s Future.
As you can see, a 56 year old couple planning to retire in 2020 is projected to get about as much in Social Security benefits as they put into the system — less wealthy couples would get slightly more, wealthier couples less, but there’s nothing especially dramatic. With fewer workers per retiree down the road, these numbers get a dicier, but Social Security can still be maintained in its current form with relatively straightforward fixes, like an adjustment to inflation indexing that Obama had on the table during recent debt talks.
But look at Medicare! No matter the income here, average recipients will get far more in benefits than they paid into the system. There is no easy tweaking here, especially with an aging population.
From Samuelson’s piece:
In 1960, national defense was the government’s main job; it constituted 52 percent of federal outlays. In 2011 — even with two wars — it is 20 percent and falling. Meanwhile, Social Security, Medicare, Medicaid and other retiree programs constitute roughly half of non-interest federal spending.
These transfers have become so huge that, unless checked, they will sabotage America’s future. The facts are known: By 2035, the 65-and-over population will nearly double, and health costs remain uncontrolled; the combination automatically expands federal spending (as a share of the economy) by about one-third from 2005 levels.
Older Americans do not intend to ruin America, but as a group, that’s what they’re about. On average, the federal government supports each American 65 and over by about $26,000 a year (about $14,000 through Social Security, $12,000 through Medicare). At 65, the average American will live almost 20 more years. Should these sizable annual subsidies begin later and be less for some? It’s hard to discuss the budget realistically if you ignore most of what the budget does.
True, some elderly live hand-to-mouth; many more are comfortable, and some are wealthy. The Kaiser Family Foundation reports the following for Medicare beneficiaries in 2010: 25 percent had savings and retirement accounts averaging $207,000 or more; among homeowners (four-fifths of those 65 and older), three-quarters had equity in their houses averaging $132,000; about 25 percent had incomes exceeding $47,000 (that’s for individuals, and couples would be higher).
The essential budget question is how much we allow federal spending on the elderly to crowd out other national priorities. All else is subordinate. Yet, our “leaders” don’t debate this question with candor or intelligence. We have a generation of politicians cowed and controlled by AARP. We need to ask how much today’s programs constitute a genuine “safety net” to protect the vulnerable (which is good) and how much they simply subsidize retirees’ private pleasures.
As Samuelson notes in the piece, there is a political contradiction here. Large percentages of Americans consistently believe that deficits and the debt are a threat to the nation, but large percentages oppose the changes to Medicare and Social Security to reduce their costs. Large percentages also oppose the tax increases that will be necessary if benefits are not cut.
There are obviously varying ways of tackling this present and looming problem. But we can’t do any of them as long as we’re in denial about where federal money is actually being spent.