Growing Old Is Worth Paying For
On The American Prospect, Matthew Yglesias eviscerates a typically inane Charles Krauthammer column in the Washington Post, in which Krauthammer claims, among other things, that the Social Security benefits levels currently planned are "entirely unsustainable." According to Krauthammer, "They cannot possibly be paid by the taxes of the fewer workers in the future who will be supporting the many retirees."
As Yglesias points out, it's simply false that there will be "fewer workers in the future" (one of the many untruths Republicans keep repeating in the unfortunately valid expectation that many Americans will accept them as true despite the utter lack of supporting evidence). Yglesias continues:
And why is it that the benefits "cannot possibly be paid by the taxes" of future workers? For the sake of argument, one can concede Krauthammer's dislike of trust fund accounting and discuss this on a cash flow basis. Benefits, viewed this way, are projected to rise by two percentage points of GDP over the next 75 years. If that were to happen, overall public sector expenditure in the United States (and therefore the long-run tax burden) would need to go up from 35.6 percent of GDP to around 37.6 percent of GDP.
Is that impossible? Obviously not. I assume Krauthammer would say that a 37.6 percent of GDP tax burden would crush the economy. Krauthammer would be wrong. The United States had public expenditure on about this scale quite regularly until the mid-1990s. The United Kingdom spends 44 percent of GDP and has been growing at roughly the American pace in recent years. Iceland has had much stronger growth with a public sector that takes around 45 percent of GDP.
Obviously, raising taxes enough to cover benefits will be politically difficult; voters (and even more so, conservative columnists) don't like tax hikes. But cutting benefits down to the level where current taxes can pay them will be politically difficult too, and rightly so. On the merits, however, there's simply no reason to believe anything bad will happen if, gradually, over the course of several decades, we raise taxes to maintain current levels of public services in the context of an aging population.
I would add the following point, which I think is too often overlooked. Pundits do a lot of handwringing about the increasing costs of various social programs, especially Social Security and health care. This often takes the form of anguished pointing at graphs that show how the expenditures in question are taking up a growing percentage of national spending as the decades pass. The conclusion, generally presented as if it needs no further proof, is that this is deplorable and sure to lead to economic collapse.
But given America's changing demographics, isn't it natural that spending on the needs of the elderly--including health care--should be increasing as a proportion of national income? Isn't it, in fact, a trend to be applauded? The fact that more people are making it into their seventies and eighties and are able to take advantage of (relatively costly) life-prolonging and life-enhancing medical procedures is a good thing, no?
Speaking for myself, I hope to live long enough to participate in this trend. I bet you do, too. (As the old joke goes, growing old may be a pain in the neck, but it's better than the alternative.) If it's desirable for us as individuals, why is it deplorable for us as a society?
Of course, we should be taking steps to eliminate waste, inefficiency, and redundancy from the health care system (starting with minimizing the role played by private health insurers, whose main function, as Paul Krugman has been pointing out, is to avoid providing health care to consumers). I'm all for getting the biggest bang for our health care and Social Security bucks. But if we as a nation have to spend more on these functions because the need is increasing, so be it. I'm sure it would be possible to identify some Defense Department programs that could be trimmed if necessary . . .