Monday, January 7, 2013

The Hoax of Entitlement Reform

By Robert Reich

It has become accepted economic wisdom, uttered with deadpan certainty by policy pundits and budget scolds on both sides of the aisle, that the only way to get control over America’s looming deficits is to “reform entitlements.” 
But the accepted wisdom is wrong. 
Start with the statistics Republicans trot out at the slightest provocation — federal budget data showing a huge spike in direct payments to individuals since the start of 2009, shooting up by almost $600 billion, a 32 percent increase. 
And Census data showing 49 percent of Americans living in homes where at least one person is collecting a federal benefit – food stamps, unemployment insurance, worker’s compensation, or subsidized housing — up from 44 percent in 2008. 
But these expenditures aren’t driving the federal budget deficit in future years. They’re temporary. The reason for the spike is Americans got clobbered in 2008 with the worst economic catastrophe since the Great Depression. They and their families have needed whatever helping hands they could get.
If anything, America’s safety nets have been too small and shot through with holes. That’s why the number and percentage of Americans in poverty has increased dramatically, including 22 percent of our children
What about Social Security and Medicare (along with Medicare’s poor step-child, Medicaid)? 
Social Security won’t contribute to future budget deficits. By law, it can only spend money from the Social Security trust fund.
That fund has been in surplus for the better part of two decades, as boomers contributed to it during their working lives. As boomers begin to retire, those current surpluses are disappearing.
But this only means the trust fund will be collecting from the rest of the federal government the IOUs on the surpluses it lent to the rest of the government. 
This still leaves a problem for the trust fund about two decades from now. 
Yet the way to deal with this isn’t to raise the eligibility age for receiving Social Security benefits, as many entitlement reformers are urging. That would put an unfair burden on most laboring people, whose bodies begin wearing out about the same age they did decades ago even though they live longer. 
And it’s not to reduce cost-of-living adjustments for inflation, as even the White House seemed ready to propose in recent months. Benefits are already meager for most recipients. The median income of Americans over 65 is less than $20,000 a year. Nearly 70 percent of them depend on Social Security for more than half of this. The average Social Security benefit is less than $15,000 a year.
Besides, Social Security’s current inflation adjustment actually understates the true impact of inflation on elderly recipients — who spend far more than anyone else on health care, the costs of which have been rising faster than overall inflation. 
That leaves two possibilities that “entitlement reformers” rarely if ever suggest, but are the only fair alternatives: raising the ceiling on income subject to Social Security taxes (in 2013 that ceiling is $113,700), and means-testing benefits so wealthy retirees receive less. Both should be considered. 
What’s left to reform? Medicare and Medicaid costs are projected to soar. But here again, look closely and you’ll see neither is really the problem. 
The underlying problem is the soaring costs of health care — as evidenced by soaring premiums, co-payments, and deductibles that all of us are bearing — combined with the aging of the boomer generation. 
The solution isn’t to reduce Medicare benefits. It’s for the nation to contain overall healthcare costs and get more for its healthcare dollars. 
We’re already spending nearly 18 percent of our entire economy on health care, compared to an average of 9.6 percent in all other rich countries.


  1. Thank you for reprinting something by Robert Reich, QB. He has a heart, a concern for the people struggling in society, the "battlers" as they're called in Australia. Reich has the spirit of FDR in him. Too bad he's not prez instead of Hopey.

    I feel guilty that I used to get him mixed up with Robert Rubin when they were both serving in the Clinton Admin. Two Cabinet officials, with responsibilities that included financial stuff, same first names, five-letter last names... I didn't follow economics as closely in the 1990s as I do now, and I knew that one of those Roberts was a scumbag. I just could never remember which one.

  2. Just assume anyone named Robert is bad, and move on. LOL. (j/k)

    Mammoth asks about how I define environmentalist. Well, in Canada they are led by Dr David Suzuki, a Dr of some sort of bug study I think (not a medical Dr). A guy who never misses an opportunity to sanctimoniously lecture you about how bad our lifestyle is, and how we have to stop using so much resources, get ever more green, stop driving and burning fossil fuels, etc etc etc, blah, blah, blah,

    All of which sound like great things, but if we do too much of them we will destroy the economy. That might be his goal, actually, to overburden industry with regulations to the point where we have none anymore, except maybe solar panel and wind turbine makers, but only if they are politically correct enough.

    So, in general, the "environmentalists" I object to are the ones who want us all to go back to horse drawn farming, an idyllic past they fixate on from watching too many movies where previous era's were romanticized.

    Because if they got their way, we would have no economy capable of employing all the citizens. A "green" economy simply does not and cannot generate enough jobs for the number of people we have.

    And having been lectured one too many times by Suzuki (he's all over Canadian TV, all the time) about how I need to go green all the time in every aspect of life, I say, the hell with that.

    I've joined the anti-Green movement, where to be admitted, you have to leave your Hummer idling in the driveway 24/7, just in case you might want to go out. (OK, joking - but I have had it up to here with these holier-than-though green types).

    My goal is to personally burn every erg of oil based energy on the planet. I may fall short, but it won't be from lack of trying. (joking)

  3. More seriously, I support sensible environmentalism, where we, over time, do shift away from burning coal and gasoline and natural gas.

    But to do that, you need large reliable base load - nuclear power, something that everyone is scared of now, after Fukishima. The problem there was poorly designed old plants, not built properly for the local environment - not that the whole idea of nuclear power is bad.

    A thorium reactor can be safe, and self contained, and pose no more danger to the local area than any power plant, if designed and built properly. The US Navy has been using them for many decades to power submarines, and now I just read a company is going to develop a newer safer design for commercial production.

    So that would be another area I disagree with the green movement, in that they are opposed to any nuclear power of any type. Old unsafe plants should be closed, but that does not mean we cannot come up with newer better designs.

  4. But I think the die hard greens are not interested in anything that allows for industrial levels of power useage, as they would prefer to see us de-industrialized totally, living in caves or grass huts, using no resources at all.

    If global population was a fraction of what it is and where it will be in 30-50 more years, their ideas might have merit. But in the real world we live in, their utopian ideas are unworkable.

    Their total humorless green outlook leads to Government digging through your trash to see if you have separated it properly, and would have the heavy hand of over-regulation throw a wet blanket over our economy, which would be just fine with most of them I think.

    Sorry, I don't want to live in a nanny state where the stifling weight of absurd laws crushes the human spirit and the economy. And that is where their vision would take us, from what I have seen and read.

    Saving the planet is a laudable goal, but it has to be done realistically. Not like Kyoto Accord style, where we would have to do all the heavy lifting here while polluter nations like China and India would not, because they are "not developed".

  5. take a look at the weather in Australia, 54 c expected...that is 129 degrees! the place is on fire! Shaz

  6. Hello Queenbee,

    seeing as there is a dysfunctional world economy in place which seems to benefit the usa i just watch in utter disbelief at the spectacle and wonder how long it will continue.

  7. You are never going to fix health care unless you deal with lawsuits and big Pharma. Politicians will never deal with either because they have either served/worked in such fields OR because they collect the payoffs from those fields.

    Instead, you will have a system where you will do what you are told or pay through the nose for disobedience while at the same time being refused from what we now all take for granted--hip replacement, knee replacement, three and four cancer treatments, heart operations at 75, and pregnancy related issues. You want to see fraud, check on those HOVERROUND chairs. Check on Medicare payments to questionable physicians. Oh, and check on the college-age kids who feel ENTITLED to go away to upscale universities to major in films of George Lucas and video game playing who want to come in to the work field at top dollar and earn a three-figure salary. Just like they expect $25,000 or more weddings with gowns at $5,000. As my dad used to say when I got married--you wear the dress EIGHT hours. I'm not paying debt on a 'party' that if the marriage doesn't last, I"ll be paying off on what would be your 25th anniversary! But, oh dear, can't say NO to kids. I see this with the 'friends' of my grandkids. They won't come play because these two don't have laptops/iPads/phones and are (oh, the horrors) still playing with dolls or doing arts and crafts at 8 and 10!

    the BIG news is the lawsuit by AIG (our 'friends' from yesterday's ad?) deciding they should SUE THE GOVERNMENT for bailing them out as the shareholders feel they got a rotten deal.

    I feel I have a gotten a rotten deal. I've been up since 3:15am in pain. My laptop isn't getting power for some reason (and it isn't that old). Another Vietnam Vet has started continuous shaking (Agent Orange and Parkinson's...what a 'fun' combo).

    As you can see, losing sleep makes me even more snarky and cynical than usual.

  8. HA HA HA HA HA! There was a spam comment for a webshite pretending to sell Percocet right after CL's comment about Big Pharma and pain. You probably won't see it because QB will come by to clean it up, but cosmic-level irony, eh?

  9. Wow QB, you're quick! The spam was gone before I posted my comment.

  10. Ah, how 'Zen' a coincidence

    Listening to drug ads about side effects is akin to watching a horror movie! What is worse, however, is how many people take no notice and simply imbibe without checking the combos of chemicals pushed at them.

    I know firsthand how some side-effects cause behavior changes, not to mention REAL, SERIOUS, problems in those taking them. And, let's face it, most people aren't smart enough to actually READ the stuff that comes with their meds OR look it up online, etc. Heck, half of them can't tell right from left.

  11. Bukko I would like to take the credit, but Google has its own spam filters, but it doesn't catch them all. It got that one after it hit to comment section. I can go behind the scenes and look at it, but why bother. How about Platinum taking off today? I also read there is s shortage of Palladium due to the amount of cars that are projected to be built in 2013.
    Record car sales exacerbating Palladium shortages for 2013