Fix Health Care First
By David S. Broder
Thursday, April 7, 2005; Page A31 The Washington Post
At a moment when the whole world is rightly celebrating the life of a man of faith, Pope John Paul II, it may seem perverse to write of the value of skepticism. But in a long span of years covering public affairs, I have come to value the contributions of the naysayers, those brave spirits who -- right or wrong -- challenge the conventional wisdom.
I had a visit from two of them this week, Dean Baker and David Rosnick of the liberal Center for Economic and Policy Research. Their skepticism attaches to the notion -- propounded by the Bush White House and accepted by most of the inhabitants of the political and journalism worlds -- that the Social Security system is in crisis.
I should say at once that I am not convinced by their argument that this is, as Baker contends in the title of a little book he and Mark Weisbrot have published, a "phony crisis."
The increasing life span of Americans and the shrinkage of the workforce relative to the number of retirees are real and significant demographic changes that policymakers should not ignore. Changes could be made in Social Security that would extend its life and adapt to the altered economic and social realities of the 21st century. And those changes can be more gradual and less disruptive if they take place soon.
But Baker and Rosnick are on solid ground in contending that the Social Security system is not the most endangered of our basic national institutions -- or the one most in need of drastic overhaul.
Last month they completed a paper that ought to be on the reading list of the White House policy office and the leadership of the House and Senate. It is called "The Burden of Social Security Taxes and the Burden of Excessive Health Care Costs."
They start from the official estimates of what it would take to make the Social Security system solvent over the 75-year period that is the span economists use for their long-term projections. The Social Security trustees say that the financing problem can be solved with a tax increase of 1.9 percentage points, split evenly between employers and workers. The Congressional Budget Office, using slightly more optimistic economic projections, says the increase would have to be only 0.7 percentage points.
By comparison, the rise in health care expenses has put a much greater dent in the pay packets of workers -- and threatens to continue to do so.
Between 1980 and 2004, the growth in health care costs exceeded that of per capita gross domestic product by 12.6 percent. In just the next 10 years, that gap is projected to grow an additional 7.2 percent.
By either the CBO or the Social Security trustees' estimates, the hit to the economy from runaway health care costs is far greater than the potential damage of a Social Security tax increase. The ratios range from four times as great to 18 times as great, depending on which estimates one chooses.
Baker and Rosnick suggest another way of making the same point. The tax increase needed to keep Social Security solvent for 75 years is of the same size as the likely growth in health care costs (above per capita gross domestic product) in the next 48 months.
The implication is obvious. "Politicians and commentators who claim to be concerned about the living standards of future generations of workers seem to be misdirecting their energy by focusing on the comparatively minor problem of Social Security," Baker and Rosnick write. "Clearly the inefficiency of the U.S. health care system poses a far larger and more immediate danger to the [living] standards of our children and grandchildren."
Others have made the point that the Medicare trust fund is in far more fragile condition than Social Security and is in need of more rapid rescue. The decision to add a prescription drug benefit to Medicare, starting next year, did not solve the problem; it made it worse.
But it is more than Medicare that is spinning out of control. The Medicaid program, which pays for indigents and for long-term care, is bankrupting state budgets. Overall, Americans are paying more for health care than the people of any other advanced industrial nation -- and reaping fewer benefits, at least as measured by life-span statistics.
In a rational world, fixing health care would come first.