Tag Archives: Medicare

What Is Social Insurance?

By James Kwak

“We do not believe that in this country, freedom is reserved for the lucky, or happiness for the few. We recognize that no matter how responsibly we live our lives, any one of us, at any time, may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other – through Medicare, and Medicaid, and Social Security – these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.”

Many liberals have been heartened by these words, spoken by President Obama during Monday’s inaugural address. Indeed, they represent one of the few times when anyone, including the president, has even attempted to defend our major social insurance and safety net programs. The usual posture among the type of centrist Democrats who make it into the administration is some combination of (a) simply attacking, as self-evidently evil, anyone who proposes benefit cuts and (b) saying in serious tones that we will have to cut spending one way or another.

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Entitlements Scare Tactics

By James Kwak

A friend asked me about last week’s WSJ op-ed by Christopher Cox and Bill Archer claiming that the government’s true liabilities exceed $86 trillion—not the  $16 trillion national debt that people usually talk about. There’s something to it, but there’s also a huge scary story in there that’s purely meant to frighten people.

$16 trillion is the amount of Treasury debt outstanding at the moment. The more relevant figure is the amount of debt the federal government owes to people and institutions other than itself. If, for some reason, I lent money to my wife and she promised to pay it back to me, we wouldn’t count that as part of the debt owed by our household. The debt owed to the public is about $10 trillion these days.

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How The Banks Stole Medicare

By Simon Johnson

The world’s largest banks have been accused of many things in recent years, including taking excessive risk in the run-up to 2008, doing great damage to the American economy by blowing themselves up and then working hard to resist any sensible notions of financial reform.

All of this is true, but it misses what is likely to be the most profound negative impact of the banks’ behavior on most Americans. The banks’ actions led directly to an increase in government debt, which in turn has made the reduction of that debt by “cutting runaway spending” a centerpiece of the Republican presidential campaign to date.

As a result of this pressure, Medicare now stands on the brink of being eliminated as a viable form of social insurance. Yet the executives who lead these banks – and the politicians with whom they work closely – will not be held accountable this election season. Continue reading

The Politics of Medicare

By James Kwak

The politics of Medicare were aptly summed up by Brad DeLong last May:

“The political lesson of the past two years is now that you win elections by denouncing the other party’s plans to control Medicare spending in the long run–whether those plans are smart like the Affordable Care Act or profoundly stupid like the replacement of Medicare by RyanCare for the aged–sitting back, and waiting for the voters to reward you.”

This is one manifestation of an important political dynamic, which is an important theme of White House Burning: the smart political bet is to accuse the other side of fiscal irresponsibility while being as irresponsible as possible yourself.

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Vouchers vs. Premium Support

Uwe Reinhardt has a very clear post on the difference between vouchers and premium support and how it applies to the Ryan-Wyden plan. You might may say that the labels are arbitrary, but there is still a substantive difference between the two in where the risk lies.

Can We Afford Medicare?

By James Kwak

The conventional wisdom, repeated endlessly by the so-called serious people, is that we can’t afford traditional Medicare and hence it has to be radically overhauled (see Ryan-Wyden for the latest round). But I’ve never seen a convincing argument for why we can’t afford traditional Medicare. Yes, costs are rising as a share of GDP. But in principle, to make the case that we have to reform the program, you would have to argue that revenues can’t rise enough to keep pace—which in most cases, just shows that you don’t want revenues to rise enough.

More specifically, you have to know how big the Medicare deficit is and how fast it is rising. By my calculations, relying mainly on the 2011 Medicare Trustee’s report, the deficit was 1.7% of GDP in 2010 and will be 3.0% of GDP in 2040. So the argument that we can’t afford traditional Medicare relies on the proposition that this 1.3% of GDP is the straw that will break America’s fiscal back. Needless to say, this is nonsense, especially since other tax revenues not related to Medicare will be rising over the same time period, at least under current law. For all the details and sources, see my latest Atlantic column.

Medicare has its problems. But we have choices.

Understanding the Budget Deficits

By James Kwak

Today’s Atlantic column is a follow-up to last week’s on the size-of-government fallacy. In the column, I break down the projected 2021 deficit into three components: Social Security, Medicare, and Everything Else. (It’s important to use 2021, or some year out there, because most of the current spike in deficits will go away as the economy recovers.) I wanted to explain here how I came up with the numbers and talk a bit more about this approach.

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