August 10, 2011
Wall Street investment banker Peter Peterson has pledged $1 billion to the effort to cut Social Security, Medicare, and Medicaid. Other Wall Street types are doing their part, as is National Public Radio.
They are doing a full court press now — things are really terrible, if you don’t give up your Social Security and Medicare, then the economy might collapse. (Oh yeah, the economy already did collapse because none of these people were troubled by the $8 trillion housing bubble, but don’t think about that.) Standard and Poor’s might have to downgrade the U.S. again, even if they can’t get their arithmetic straight. (Math is hard.)
NPR did its part yesterday with a piece that told us that the debt is not just that scary $14 trillion number that we all hear, it’s actually — stand back boys and girls — $211 trillion!!!!!!
Are you impressed? You should be. This is an extraordinary example of cesspool journalism that would even embarrass Fox News.
The piece gets from the debt number normally reported to $211 trillion by doing some unusual accounting (following a methodology developed by Boston University economist Lawrence Kotlikoff) and also hiding assumptions about exploding private sector health care costs. First, the calculation adds up all the Social Security and Medicare benefits that current workers are projected to receive and then assumes that no new workers pay taxes into the system.
This methodology would imply enormous deficits in these programs even if they were projected to be fully solvent forever, in the sense that current tax payments would always pay current benefits. The reason is that today’s workers will provide a smaller share of the tax revenue as more of them retire. It is unlikely that any of NPR’s listeners would be very scared if it told listeners that Social Security and Medicare would be fully solvent indefinitely, but applying the methodology from this segment it could tell listeners about tens of trillions of dollars in uncounted debt.
The other part of the story is that much of this $211 debt figure is driven by projections of exploding private sector health care costs. Per person Medicare costs are projected to rise far more rapidly than the rate of economic growth in the projections used in this segment (albeit not in the Congressional Budget Office’s baseline or the Medicare Trustees projections) because private sector health care costs are projected to rise far more rapidly than the rate of economic growth. The projections in this segment imply that the cost of providing a Medicare equivalent policy for an 85-year old in 2030 will be $40,000 a year (in 2011 dollars) in 2030. The cost would exceed $100,000 a year (also in 2011 dollars) by 2080.
If private sector health care costs actually follow the path assumed in this segment’s debt calculations it would devastate the economy even if we eliminated public sector health care programs like Medicare and Medicaid. On the other hand, if U.S. health care costs were contained, like those in every other wealthy country, then there would be no long-term deficit problem.
An honest news report would have discussed the projections of explosive private sector health care costs and what they mean for the economy if they prove true. It would not hide these projections in a huge debt figure and tell its listeners that the debt is much bigger than they realize.
The only possible point of a piece like this is to scare people. It provided no information whatsoever about the country’s fiscal situation to NPR’s listeners.
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