Robert Samuelson has published a piece in Newsweek that I recommend.
Not quite three months ago — "The Problem is the Amount of Spending on the Elderly" — I blogged a bit about Samuelson's views on the strain that spending on the elderly will place on workers in the future. His latest column returns to this theme, once again castigating politicians and pundits for not debating the truly important issues.
Here are the three most important paragraphs:
Just recently the trustees of Social Security and Medicare issued their annual reports on the programs' futures. Here's one startling fact that emerges from a close examination of the reports: By 2030 the projected costs of Social Security and Medicare could easily consume—via higher taxes—a third of workers' future wage and salary increases. Toss in Medicaid (which covers nursing home care and isn't included in the trustees' reports) and the bite grows. We're mortgaging workers' future pay gains for baby boomers' retirement benefits.The facts are hiding in plain sight. The trustees' reports project Social Security and Medicare spending. They also estimate future wages and salaries—the main tax base for Social Security and Medicare. Comparing the two shows how much retirement costs may erode wage increases. The reports should make and highlight this calculation, but they don't. So I asked economists Tom Saving of Texas A&M University and Eugene Steuerle of the Urban Institute to do it. They provided similar results.
Here are the basic numbers, as calculated by Elizabeth Bell, a research assistant to Steuerle. In 2005 Social Security and Medicare are expected to cost $822 billion (that's net of premiums paid by recipients); by 2030 the costs are projected to increase to $4.640 trillion. That's an increase of $3.818 trillion. Over the same period, annual wages and salaries are projected to rise from $5.856 trillion to $17.702 trillion—an increase of $11.846 trillion. Despite the big numbers, the arithmetic is straightforward: The increases in Social Security and Medicare represent 32 percent of the increases in wages and salaries.
Samuelson then looks at what he considers the likely economic and political consequences of these projections. Naturally, they're rather grim.
Clearly, Samuelson is right. We need to debate the burdens that can be fairly placed on workers in the future. The Republicans obviously aren't interested in such a debate. Unlike Samuelson, I don't much blame Democrats for challenging Bush on Social Security while downplaying Medicare and Medicaid, if only because there's only so much that a minority party can do at one time. Democrats can't change the terms of the debate on their own, and if the President and the Republicans in Congress refuse to lead, well, there's not much that Democrats can do.
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