July 31, 2014
Yes, what else is new? The immediate topic is Gene Steuerle’s new book, Dead Men Ruling (reviewed here). The basic story, taken from the book, is that commitments made in the past, specifically Social Security, Medicare, Medicaid and interest on the debt, are taking up an ever larger share of the budget. This means that in the decades ahead people will have little say in how their tax dollars are spent, since they have already been committed by prior generations of “dead men.”
There are several problems with this story. First, categories of spending are not the only way in which past generations obligate future generations. Military actions and tough on crime laws also impose large burdens on future taxpayers. For example, when the U.S. went to war in Iraq it not only committed itself to many decades of payments to veterans, included many who were wounded or disabled, but it also implied future commitments to the region. While the country may be able to back out of these commitments, politicians will often be reluctant to do so.
In the same vein, tough on crime measures, such as three strikes laws, can mean that we will have to support a large prison population for decades into the future. (It can also mean that people spend their life in jail for petty offenses.) There is little obvious basis for highlighting the spending committed by social programs while ignoring spending committed by military actions and harsh criminal penalties.
A second problem with the logic here is it implicitly assumes that the revenue is available independent of the spending. This is almost certainly not true, especially in the case of Social Security. Under the law, Social Security taxes can only be used for Social Security spending. There is also reason to believe that people view Social Security taxes as different from other taxes. The National Academy for Social Insurance recently did a poll which found that a majority of people would be willing to pay higher taxes if it was necessary to avoid a benefit cut. The fact that taxes and spending are linked both in law and the public’s mind means it is misleading to include Social Security revenue in the denominator of money available to spend. It isn’t. (This would be explicit if we privatized Social Security.) This means that the amount of taxes that are actually up for grabs is much less than Lane-Steuerle say, and the portion committed by dead men for social insurance is considerably less.
This brings us to the other side of the ledger, Medicare and Medicaid. We spend more than twice as much per person for our health care as people in other wealthy countries. This should not be something we take for granted for all future time. After all, our political leaders are not that much more corrupt and incompetent than those in other countries.
If we paid the same amount for health care as people in other countries it would free up large amounts of revenue. However this would mean going after our doctors, the drug companies, and the medical equipment manufacturers, all of whom pocket close to twice as much as their counterparts in Europe and Canada. Of course this means going after powerful interest groups. That is not a popular position in Washington and certainly not at the Washington Post. (It should be noted that the Post gets large amounts of advertising revenue from drug companies.)
So the real question raised here is whether we look to cut benefits for seniors or whether we look to cut waste from the health care system. We know where Charles Lane and Post stand.
Addendum: I should also mention that patent monopolies also should be listed among the commitments made by dead men. In effect, a patent monopoly is a privately collected tax, where we allow patent holders to charge prices far above the free market price, but threatening competition with jail. Anyone looking at ways in which the government commits the resources of future generations should certainly count these obligations. For prescription drugs alone the excess price is around 2 percent of GDP (10 percent of the federal budget).
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