Michael:

Did you see in the Wall Street Journal of February 19 a column by David Wessel entitled “View From the Right: Tax Increases Ahead”? It is based on an interview with Bruce Bartlett, a confirmed believer in supply-side economics and tax-cutter from the Reagan and first Bush administrations. Rather unhappily, given that background, he is currently predicting that even if the Republicans keep the White House in this year’s election, they’ll have to raise taxes by more than $100 billion a year. He blames the necessity for these increases on President Bush:

“These tax increases, when they come, are the result of conscious deliberate decisions this administration has made,” he says, scolding the president for failing to veto a single spending bill and, particularly, for acquiescing to a costly expansion of Medicare.

The Republican’s freespending ways, while regrettable, wouldn’t be the end of the world, of course, except that with each passing year the fiscal tsunami of baby-boomer retirement draws closer. Even Bush’s recently released budget, according to Mr. Wessel, notes this problem (granted, on page 191 of the “Analytical Perspectives” volume):

The budget is on an unsustainable path.

If you aren’t aware of just how unsustainable a path the U.S. budget is on, consider some of the following, which comes from an article by Nathan Littlefield in the January-February Atlantic (the magazine formerly known as the Atlantic Monthly.):

Under any reasonable set of assumptions about economic growth, the natural growth rate of health-care costs, and other important factors, the gap between what we expect to pay and what we expect to receive is enormous.

How enormous, you ask? Well, based on the work of economists Jagadeesh Gokhale and Kent Smetters, the size of the gap amounts to $45.5 trillion dollars. To put that figure in perspective:

…[T]he entire U.S. economy generated only about $10.4 trillion last year, and total household wealth is currently only about $39 trillion. Though no single generation will have to cover the whole $45.5 trillion (and the generations that are already in or very near retirement may not need to cover any of it), ultimately some Americans will have to pay, through dramatically higher taxes or dramatically reduced government services or both.

Wait a minute, you ask, how could we be in such a long-term situation and not notice short-term impacts? (It’s sort of like being told the ship is sinking and not noticing any water in the hold.) Well, according to Mr. Littlefield:

The magnitude of this looming gap has been masked for the past several decades by a demographic blip—the Baby Boom, which for nearly forty years has provided a large base of workers who contribute payroll and income taxes while consuming relatively few government services. In 2012, however, the situation will begin to reverse: a large proportion of the population will begin drawing more heavily on government services, while the relative number of taxpaying workers will start to shrink…In short, if we don’t make policy changes soon, the government’s financial situation will begin imploding within the next ten years.

Well, it may not be pretty, but I’m sure we can handle it without doing anything drastic, right? As we’ve been assured for years, it’ll just take a few modest tax increases and all will be right with the world. Umm, maybe not:

[In order to] retain Social Security and Medicare as broad middle-class entitlements, maintain Medicaid, hold defense spending near present levels (about 3.5 percent of GDP) and keep the rest of the government at its current size...federal spending would [have to] grow from 19.5 percent of GDP today to 39.7 percent in 2075, resulting in a government proportionately larger than German’s or France’s. To fully cover a U.S. government of this size, lawmakers would need some way to permanently increase tax revenue by 70 percent a year—beginning today.

Geeze, all of this sounds like a good reason to toss these spendthrift Republican bums out on their rears and vote Democratic. Except for one thing—I’m not hearing any discussion of how to fix this problem, or even an admission that there is a problem, from the left side of the aisle.

Assuming that Senator Kerry will be his party’s candidate, I checked out his stance regarding drastic restructurings of social security and Medicare (these two programs constitute the bulk of the spending/revenue gap, with Medicare alone responsible for something like 3/4 of it). When asked what he had done to ‘strengthen’ Social Security at the Democratic Presidential primary in Iowa on January 4, he replied:

Well, we did protect Social Security in the US Senate, and Social Security is safe and sound well into the next two decades or more. With very minor changes, with a strong economy, the next generation will have Social Security. I will never privatize Social Security. I will never try to extend the retirement age for Social Security. And I will not cut any benefits for Social Security. [Emphasis added]

And when asked what his first action would be as President at the Associated Press Q&A on January 25, 2004, Mr. Kerry replied:

I will send to Congress a health care plan that stops spiraling costs, covers every child in America, and makes it possible for every American to get the same health care as any member of Congress. Making health care a right and not a privilege is something worth fighting for. [Emphasis added]

Well, I don’t know about you, but that sounds to me like taxes will be a-goin’ up—through the roof, in fact—in either a Kerry or a Bush administration. Gosh, what’s a small government conservative to do? I guess we should think about moving to Sweden for a few years: at least that way we’ll desensitize ourselves to the 70% tax increase.

Cheers,

Friedrich

All the Democratic candidates have, however, promised to reverse some or all of the Bush tax cuts. Reversing all of the cuts would be the best option (see this subscribers-only article available in part here) and the option promised by Dean, but unfortunately he's out of the running. Bush, on the other hand, has continued to push for tax cuts year after year, so if he is re-elected he will probably continue to do so.
Ergo, vote for the Democratic candidate.

Posted by: Chris Martin on February 20, 2004 12:45 PM

As I understand it, however, the reversal of the Bush tax cuts doesn't begin to solve this problem (according to the Wessel column, reversing the tax breaks for those with incomes above $200,000 only raises a measly $25 billion a year, chump change in the bigger picture) so I think the analysis needs to be a bit more searching than that. However, I hope that some serious thinking is done on this on both sides of the aisle, and soon--the longer we wait, the nastier this will get.

Posted by: Friedrich von Blowhard on February 20, 2004 12:52 PM

Time to drop out, find outselves an uninhabited island with good weather, and declare ourselves our own sovereign state.

I wonder if and when politicians will start to get over their (apparently overwhelming) love of making promises and starting up new programs. The sooner the better, since it looks like the time has come to spend a couple of decades cleaning up messes, scaling back, and getting various books in order. Not that such activities have ever appealed to politicians.

Posted by: Michael Blowhard on February 20, 2004 1:08 PM

It's a pretty tough devil's choice:

- a Dem party that wants to solve fiscal insolvency through more taxes

- a Repub party that SAYS it wants to solve it through smaller govt but doesn't ACT when the rubber hits the road (and, in some ways, actually acts counterproductively)

What's a voter to do? I agree w/ Friedrich - at least the conservative INSTITUTIONS are talking about fiscal insolvency and the hard choices it requires; we do NOT hear the same sort of long term argument from the Dems - only the short term plea to make the rich pay more of their "fair share"

Posted by: vinod on February 20, 2004 1:13 PM

I hope we all like McDonald's. Sounds like that's where we'll all be eating in our golden years.

Posted by: annette on February 20, 2004 2:13 PM

Friedrich, I'm not sure what the basis for Wessel's referral to incomes above $200,000 only raising a measly $25 billion a year. Why the arbitrary cutoff at $200K? Looking at a non-arbitrary example, i.e. the Kerry platform here's what the TNR article says: "Roughly speaking, the tax cuts Kerry and the rest suggest keeping amount to half of the cost of President Bush's cuts overall. In other words, the monetary difference between total repeal and partial repeal is a full $2 trillion."

Michael, you talk about getting books in order. That's something Clinton actually did. Clinton made balancing the budget a priority. Most centrist Democrats would also make that a priority. Empirically, the economy also does better under Democratic presidents, and a better economy would lead to more tax income. Unfortunately popular misconceptions die hard, so the Republican party still has the reputation of being the pro-economic-growth, conservative party.

Vinod, it's interesting that you state "at least the conservative INSTITUTIONS are talking about . ." There's a word for talking about but not doing anything about x. That word is hypocrisy. If said conservative institutions would put their money where their mouth is, they would get behind the DLC wing of the Democratic party. Such a cognitive shift would be very, very hard, but it would be the sensible thing to do.

Irresponsible is a harsh but blunt way to describe Republican fiscal policy since Reagan. At least Reagan had enough wisdom to stop and readjust after one tax cut and Bush, Sr. had the guts to raise taxes to fix Reagan-era problems. George W seems to have no self-correcting mechanisms.

Vinod, you also use the phrase "solve fiscal insolvency through more taxes" to describe the Democratic platform. A more accurate phrase would be "reversal of just one president's tax cuts." Such a reversal would bring tax levels to Clinton-era levels, which by historical standards are NOT high and do not impede growth. Referring to a chart of tax rates through history would make this clear.

Posted by: Chris Martin on February 20, 2004 2:14 PM

I'm not sure about Sweden, but I reading in the Economist that Germany, France, Japan, UK have similar problems, and it's more pronounced than the US because their low birthrates aren't supplemented by much immigration. Germany recently (tried?) to raise the retirement age a few years higher which saves a few trillion quid or something, I think.

Obviously, 65 today is not the same as 65 during the New Deal era because of increased life-span, so it's not exactly unreasonable to raise it to 70, IMO. Probably the US will have to try something similar. Another option is to open up our borders to flood the economy with tax-paying workers. Still another option is to increase the efficiency of our health-care system, which I read recently is the 37th most efficient in the world (can't recall the source so take this with a grain of salt). I'm not really sure how much money this saves, though.

The problem with privatising social security, I think, is that the government uses that income not just to pay out social security benefits but everything else as well. So if the government shifted social security to a mandatory-contribution-to-private-retirement-account-thing, it would still have to raise taxes a similar amount or cut spending proportionally to keep the budget balanced. No matter what we pay more money.

(BTW, I'm no expert on this issue, I may be completely full of shit. I'm just integrating stuff I've read in the Atlantic and the Economist and Krugman's op eds.)

For my part I'm hoping to win the lottery.

Posted by: nick kallen on February 20, 2004 3:23 PM

We should have known that "New Deal" thingy would turn around and bite us in the patootie. Three easy steps to a solution, then, none of which will ever be adopted because, as de Tocqueville foretold, the people have learned that they can vote themselves money. (By the point, he thought the ability of the people to vote themselves money would prove the downfall of democracy in America.)

1. We raise the Social Security retirement age to 75 instead of 65 right now. People already on Social Security stay on it, but we don't allow new recipients of benefits for another ten years. Of course, baby boomers will scream bloody murder, because they'll say they've been denied their chance to suckle at the governmental teat. (To which the rest of us must respond: "Too bad, O narcissistic ones -- there ain't enough milk in the cow for all of you. Besides, you're grown men and women. You don't need Momma Government anymore; you can take care of your own selves.")

2. Never ming privatizing Social Security accounts -- we already have that, and they're called "IRAs." Let's end Social Security altogether. This would be pretty easy to sell to resentful baby boomers. We just claim that it would be a fitting final revenge on those awful Gen-X kids who refused to acknowledge their parents' rightful place at the Center of All Things and therefore must be punished, punished, punished. (Here's hoping we Gen-Xers know enough to tell them, "Oh please, don't throw us in that briar patch.") So under this proposal, if you're under age forty, say, you can kiss the promise of a government-subsidized old age goodbye. You'll still have to pay for all the old coots -- to which the boomers can say, "Too bad, injustice is real, life sucks, etc." while laughing so hard they spew Ensure out their noses. But they'll be dead, and those of us who survive will be free. Worth a little sacrifice, I should think.

3. While we're on sacrifice, let's cut pork-barrel spending. No more indoor rainforests in Iowa, no more Federal-sponsored floodwall murals in Missouri. Kill a few sacred cows while we're at it (bye-bye Medicaid!); we need the meat. BTW, Pete DuPont's proposed Constitutional amendment requiring a three-fifths congressional majority to raise levels of discretionary governmental spending beyond growth and inflation is starting to sound pretty good right about now.

Posted by: Tim Hulsey on February 20, 2004 4:05 PM

Mr. Martin:

I don’t know where Wessel got his figure of $25 billion annually. But the same point effectively gets made in the piece you link to:

So let's keep the figures simple, starting with $4 trillion. According to the Urban-Brookings Tax Policy Center, that's roughly how much the Bush tax cuts are likely to cost in the ten years after 2005, when the next presidential term begins…Roughly speaking, the tax cuts Kerry and the rest suggest keeping amount to half of the cost of President Bush's cuts overall. In other words, the monetary difference between total repeal and partial repeal is a full $2 trillion.

Hey, $4 trillion (over 10 years) sounds like a lot, but not when you compare it to the $45 trillion gap we’ve got (which, BTW, is getting larger every year.) And Kerry only proposes recapturing half of that, anyway.

Also, ahem, aren’t you being just a little disingenuous here? I mean, this problem is not driven by a lack of funds (remember, the U.S. public sector in 2004 has more than quadruple the resources per citizen—in real terms, adjusted for inflation—that it had in 1950). The problem is driven by spending, and, in particular, spending on health care. By massive subsidies on the order of half of all health care costs (the rest of which are paid for by insurance, and hence also ‘socialized’) the Federal government has effectively turned the health care industry into a fast-growing tumor on the body politic, with its own proprietary blood supply, sucking up an ever-larger proportion of the body’s energy and nutrients. The main reaction of the Democrats has been, and apparently continues to be, per Kerry’s remarks, a concern that not enough people are being insured—hence, to continue my analogy, that the tumor’s blood supply, the direct and indirect public subsidies, are inadequate. I guarantee you that the health care industry tumor will suck up ever last dollar you send its way, and use that money to grow ever larger and more luxuriant. I must ask when the Democrats are going to wake up and realize that we have a problem here.

Posted by: Friedrich von Blowhard on February 20, 2004 6:03 PM

Well, if we socialized medicine directly rather than indirectly, the quality of health care would promptly decline, and people would die a lot sooner (including doctors, whose rates of suicide are much higher in Canada than in the USA). This might also help our Social Security problem, in a way.

Posted by: Tim Hulsey on February 20, 2004 10:22 PM

my parents (self-employed) pay $1900 (total) per month for minimal health insurance. They are both over 60 and struggle to pay the bills.

How many americans aren't insured? It's something like 50 million, right? The problem is not with the Democrats' desire for universal health-care.

--

A lot of people talk shit about Canada and France's socialized health-care. I don't care what the suicide rate is. They talk shit out of complete ignorance. I've broken a few bones in my life, and let me tell you the best place in the world to break a bone is France. I paid, what, $50? to get a cast and I waited maybe 5 minutes in the waiting room. Compare that to the numerous times I've waited hours in hospitals in the USA and paid my full (several hundred dollar) deductable. I've had Kaiser, Blue Cross, and Blue Shield. America's healthcare system is f'd up.

I have no idea what budget-surplus Canadia is like, but the bottom line is that socialized health-care is not the problem.

Posted by: nick kallen on February 21, 2004 2:57 AM

Mr. Kallen:

I'm sorry to hear about your parent's difficulties, and I'm glad you got nice care from the French, but I've got to point out the implicit logic in your post. To wit, that the best health care system is the one that transfers the largest part of the cost of healthcare to somebody else. I mean, you know that setting your bone in Paris didn't cost $50, right? Who picked up the rest of the tab? This is the inherent difficulty with a socialized payment mechanism (either socialized via governmental subsidy or socialized via insurance 'risk pooling'--it creates no incentive to manage cost, or rather, an incentive to disregard cost and claim as many services for oneself as possible, because you know everyone else will do so. In economics this is known as the tragedy of the commons. Now, socialized payment mechanisms become wildly financially problematic when coupled, as in the U.S., with a for-profit health care sector--it's a formula for overuse and overcharging and inefficiency. I assume you're aware of widely held estimates that at least one third of health care expense in the U.S. is wasted as either unnecessary or useless. The U.S. will either have to go the route of socialized medicine, in which financial discipline will be maintained by the state, or it will have to entirely reconsider the entire complex of laws and regulations currently preventing rational, cost-effective medicine from being practiced.

Posted by: Friedrich von Blowhard on February 21, 2004 3:58 AM

But when financial discipline is imposed by the state (cf. China, Canada, Cuba, France), there is suddenly no incentive for care providers to maintain adequate services. If the state imposes price controls on pharmaceutical companies, they'll either cease research, or stop producing medicines altogether. Plus, when doctors become mere peons of the state, people suddenly decide they don't want to become doctors anymore. With shortages of medical care and qualified personnel, people start dying of plague or some other eminently preventible illness, and the whole Social Security problem gets solved in a ruthlessly Malthusian fashion.

BTW, you can't judge a national system health care by how much it costs for a doctor to set your broken bone. Michael Moore makes this mistake all the time, when he claims that Cuba has the best health care on the planet. Setting a broken bone doesn't exactly require state-of-the-art medical care; any Boy Scout worth his salt can make a decent splint or bandage. (At least, I could do it back when I was a Boy Scout.) But if you find yourself with a cerebral hemorrhage, you need really good medical specialists to keep you from dying. That's why Canadians with severe medical problems make a run for the US border.

Posted by: Tim Hulsey on February 21, 2004 5:46 AM

This topic interests me greatly, and is rapidly becoming my primary academic focus. I commented in a prior thread about my discipline, which is a mixture of gerontology and vision science, and thus health care costs and the demographics of aging loom large in my professional life.

Since I collect enormous reams of data, I am frequently called upon to lobby members of the Senate and House on matters relating to health care programs and reforms. It’s quite an experience to find oneself sitting in a Senator’s office, waiting to be called upon next to deliver your well-rehearsed 5-10 minute pitch. Of course I provide data and outcome measures, but … my speech provides the most impact to Republicans and Democrats alike when the individual I’m addressing has personally experienced the issues I’m discussing. Facts and figures become irrelevant a Senator has a 90-year-old mother with an eye disorder and doesn’t know where to turn for appropriate assistance. The conversations can become amazingly personal amazingly quickly. And therein lies the key – one cannot deny the personal element in such policy interactions. Such conversations become more powerful because I can supplement these personal anecdotes with hard science and research data.

The issues that you highlight are correct and appropriate, and are becoming unavoidable as the demographics of the US are heading toward the oldest-old like a runaway train. Here is an article in this week’s NYT magazine that aptly summarizes this trend:
http://www.nytimes.com/2004/02/22/magazine/22LONGEVITY.html

This is my life’s work, and I struggle daily to reconcile the personal, the professional, and the scientific. Everyone has something valuable to contribute to the discussion, but I’m not in favor of socialized medicine; in my experience it leads to the lowest common denominator of care.

Posted by: Maureen on February 21, 2004 11:27 AM

Can somebody say INFLATION?!?!?!

Posted by: ricpic on February 21, 2004 12:43 PM

Well, I don't know the budget factors but I am wary of single-factor explanations. Certainly, healthcare costs are rising with boomer retirement, but the recent tax cuts are another strong factor in the deficit. Besides $4 trillion might just be 10% of the deficit it's a lot higher than 0% of the deficit.

One factor in healthcare costs is drug prices, which are high because pharma companies choose to spend so much on marketing while claiming to spend so much on research. There's a good article by two former editors of the New Engl Journal of Medicine here that documents this issue:

www.healthcoalition.ca/ar2.pdf

On the whole, it depends on whether you believe altruism should be a component in healthcare, or if we should think of healthcare as just another industry.

Cutting pork-barrel projects and being more frugal with military spending would also help.

As for people over 65, I think we should ship them, er, outsource them to India.

Posted by: Chris Martin on February 21, 2004 2:01 PM

Maureen:

There's nothing I fear more than personalizing the debate over health care. I mean, let's face it, we're all mortal and we're all going to go through some pretty rough patches along the way to the grave. And while it may make our near and dear relatives weep to see us suffer, the fact is that care is not free, and that money siphoned from others to pay for my care means they have less to spend on food, clothing, shelter, their own retirement, etc., etc. Statements like Mr. Kerry's--Making health care a right and not a privilege is something worth fighting for.--are effectively saying that all other human needs in the United States should be subordinated to the health care needs of the elderly. Excuse me for saying this out loud, but this is simply insanity. The old are not more valuable than the young, they are less valuable, and a civilization that sacrifices the young to the old is, IMHO, so wrong-headed as to be immoral.

Um, so personal stories about the senator's poor mother who can't find care for her eye disorder can be immoral, particularly if they're not balanced by anecdotal evidence about the real human needs of the rest of society.

Posted by: Friedrich von Blowhard on February 21, 2004 5:47 PM

The old are not more valuable than the young, they are less valuable, and a civilization that sacrifices the young to the old is, IMHO, so wrong-headed as to be immoral.

The baby boomers may disown you if you say that too loudly, Friedrich.

Posted by: Tim Hulsey on February 21, 2004 5:59 PM

Ah, heck, let 'em--I've never been very in tune with my contemporaries. Might as well make it official.

Posted by: Friedrich von Blowhard on February 21, 2004 7:25 PM

Friedrich:

I guess we simply disagree, then. My comment was meant to imply that people tend to act in their own self-interest. I guess you won't be showing up in any of my classes, then, eh?

Posted by: Maureen on February 21, 2004 11:20 PM

It is one thing to act in your own self-interest. It is quite another to impose your self-interest on everyone and everything around you. The first is rationalism; the second, narcissism.

Posted by: Tim Hulsey on February 23, 2004 4:38 PM

Tim:

You're quite right in that respect. It's always a difficult line to tread when advocating for health-related programs within the current US system as it is now defined. I very much see the merit in working with a variety of professionals outside my (potentially incestuous) field, and have been enriched by establishing working relationships with economists and program specialists well outside my area of expertise and political affiliation. At first I was uncomfortable, but now I actively seek out such partnerships.

Over time, I have come to understand that going to the Hill and advocating for a particular point of view will only serve to perpetuate this morass that is our current entitlement system, but many others in my field may not be so open to this alternative POV.

I do, however, see value in old age, and that is not a position that I can modify at will. I understand very well the generational conflict that this engenders, and I address it frequently with my students. The system is broken but still requires us to advocate for our respective programs and policies as if it wasn't.

Posted by: Maureen on February 23, 2004 5:33 PM

Maureen:

I think the question is not whether or not you see value in old age (which I do as well), but do you see infinite value in old age? Should all other human needs be utterly subordinated to the health care of the elderly? If not, what principle (ethical or otherwise) do you propose to decide how many resources should be applied to the health care needs of the elderly? Is it okay for the young to be educated? To eat ice-cream cones? Where do resources spent on the young 'cross the line'?

Seriously, until you can answer that question, I would think that you are actually on rather shakey ethical ground using the principle you seem to advocate above, to wit:

The system is broken but still requires us to advocate for our respective programs and policies as if it wasn't.

Isn't that just a statement that you're going to pretend that the laws of scarcity have been repealed and that you're going to ignore who has to go without in order to get your programs funded?

Posted by: Friedrich von Blowhard on February 23, 2004 7:35 PM

Friedrich:

It’s a good question that you asked. I’ve been out of commission for 4-5 months or so, and when I returned to work recently, I was shocked to see the Darwinian nature of the escalating program funding wars. “What are we doing?” I asked myself (and then my colleagues), and the answer was “What we have to do – protecting our constituencies.” During my absence from work, I had been reading about the nature of ethics, and what I saw when I returned disturbed me greatly. It’s also likely that this ethical disturbance led me to enter this thread, since I wasn’t terribly sure if my impressions were valid. I posted as if such advocacy was natural and right, hoping that someone would question these blithe assumptions, especially in the face of very real budgetary restrictions. You challenged me, which was correct and confirmed my nascent unease. Although I would not necessarily characterize such positions as “immoral” or “narcissistic,” surely they bear further examination.

We in the disability studies field have been trained primarily as advocates rather than as ethicists. Of course we all adhere to a professional code of ethics, but that is generally the extent of ethics studies in many (but not all) institutions. Why? For many years, we have assumed that what we did was so ethically, unerringly “right” that our intentions (and thus outcomes) could never be questioned. That time has passed, I believe, as we face a crowded world laden with perilous ethical and financial choices. To that end, we have very recently decided to include a course on ethical issues in our general department curriculum. It should be interesting.

You also said this: “Isn’t that just a statement that you’re going to pretend that the laws of scarcity have been repealed and that you’re going to ignore who has to go without in order to get your programs funded?” It’s another good question I’ve been thinking about. They haven’t been repealed, of course.

Garrett Hardin, in a slightly different context, said: “To be generous with one’s own possessions is quite different from being generous with those of posterity.” I also perused the work of Peter Singer, whose utilitarian outlook I have always approached with some trepidation, but this observation about the Darwinian left is highly applicable: “Stand by the traditional values of the left by being on the side of the weak, poor and oppressed, but think very carefully about what social and economic changes will really work to benefit them.” We have not done that well.

In our defense (which is not a defense, really, but a reality), the funding streams for child and adult programs are completely separate and thus don’t force us to consider the divisive nature of these budget battles. My child education colleagues don’t have the faintest notion about the programs and funding issues in gerontology and blindness, and I’m not sufficiently acquainted with the child education issues either.

Which is all to say that I don’t have any answers except that these associated ethical issues are paramount and must surely be addressed. A little time away from work is good for the brain, it seems. Looks like I'm going to be busy.

Posted by: Maureen on February 23, 2004 10:23 PM






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