April 30, 2016
Washington Post editorial writer Charles Lane appeared to be throwing in the towel on the Post’s dream of cutting Social Security and Medicare in a column headlined, “Entitlement Reform, RIP.” The piece recounts a sad story whereby the bulk of currently scheduled federal spending is already committed to entitlement programs like Social Security, Medicare, and Medicaid:
“Seventy-five percent of planned federal spending between now and the end of the next two presidential terms is mandatory: Social Security, Medicare and other entitlement programs, plus interest on the national debt, according to Congressional Budget Office forecasts. That money is going out the door no matter who’s president.”
The piece complains that this indicates a lack of democracy, since it means that spending will have been committed by past decisions. Of course a problem with this story is that voters seem to overwhelmingly support this spending, as Lane complains:
“Moreover, if the primary results demonstrate anything so far, it is that voters of both parties oppose trimming entitlements, especially the two giants, Social Security and Medicare, that benefit the elderly.”
So, we are suffering from a lack of democracy because voters are getting what they want? Only in the Washington Post.
There are a few points worth adding to this discussion. First, if voters in future years decide to increase their own taxes, as their parents and grandparents did (the combined employer and employee payroll tax was just 6.0 percent at the start of the 1960s and the Medicare tax was zero) then they can use 100 percent of the revenue for whatever they like. If competent economic policies allow workers to share in the gains of productivity growth, just taking one-tenth of projected gains in tax revenue would allow for an enormous expansion of the public sector over the next three decades.
Second, if the economy remains below full employment, which seems quite plausible given recent economic weakness, then it will be possible to increase spending with no tax increases at all. Of course, deficit fanatics like the WaPo editorial board will scream, but that is a pretty damn absurd scenario. The WaPo will be yelling that we can’t spend because of utterly baseless claims about the dangers of deficits and then blame Social Security and Medicare for the lack of funds.
Third, the current generation imposes all sorts of conditions on future generations. For example, we hand down a massive environmental problem in the form of global warming. We also hand down a physical capital stock and infrastructure. Our failure to spend adequately on things like clean water will leave many children with problems for life. Similarly, inadequate funding for education will put millions of children at a disadvantage over their lifetime, as will the decision by the deficit hawks to keep their parents from having jobs.
Also, patent and copyright monopolies are another way in we allocate future money from our children. Just because the Post chooses not to notice this money (perhaps because the pharmaceutical industry is a big advertiser) doesn’t make it go away. Patents and related rents are costing close to $400 billion a year (@ 2.0 percent of GDP) now in higher drug prices alone. This amount will only increase through time.
So, the Post’s desire to cut Medicare and Social Security is touching, but it has nothing to do with protecting our children’s ability to govern themselves.
There is one more point worth mentioning. Lane complains that no one is talking about adopting the “more accurate” chained consumer price index as the basis for indexing Social Security. He meant to say “lower,” since the index typically shows a rate of inflation that is 0.2–0.3 percentage points lower than the standard CPI. We don’t know that the chained CPI is more accurate as a measure of the rate of inflation seen by seniors, since it does not track the items actually purchased by seniors.
If Lane actually wanted a more accurate index then he would be calling for the Bureau of Labor Statistics to construct a full senior CPI that would monitor the price changes on the items actually purchased by older households at the outlets where they make these purchases. Neither Lane nor the Post has ever advocated such an index, which indicates their interest is in reducing Social Security benefits, not in indexing them more accurately.
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