Beat the Press

Dean Baker's commentary on economic reporting


The Medicare and Social Security Hoax

Medicare and Social Security costs are projected to soar over the next decade as the baby boomers retire. Medicare and road maintenance costs are projected to soar over the next decade as the baby boomers retire.

Health care costs in the United States are out of control, with per capita health care costs rising at rate that is more than 2 percentage points more rapid than the rate of growth of per capita income. If this pattern continues, health care costs will have a devastating effect on the private economy and also on the federal budget because of government health care programs like Medicare and Medicaid. The obvious policy response to the projections of exploding health care costs would be to find some way to fix the U.S. health care system (no other country has a problem of the same magnitude). It is dishonest to portray the issue as a problem of aging – we can afford the costs associated with aging – the problem is our health care system.

When the media reports, as the Post did this morning, that the problem is not with discretionary spending, “but with entitlement programs such as Medicare and Social Security, which will grow by 23 percent through 2010,” they badly mislead readers. The cost of Social Security is rising only slightly faster than GDP. Over the next decade, Social Security spending is projected to increase by just 0.2 percentage points as a share of GDP. By contrast, spending on Medicare and Medicaid is projected to increase by a total of 1.5 percentage points of GDP.

Furthermore, Social Security is financed by a designated tax that is projected to keep the program fully solvent through the 2052 by the non-partisan Congressional Budget Office. This means that any cuts to Social Security should in principle be matched by cuts in the tax, unless the intention is to mislead people about the purpose of this tax.

There is a large and powerful lobby that would badly like to cut and/or privatize Social Security, and they have no qualms about playing with the truth to advance their agenda. The media should not help them.


Post a Comment

<< Home