The omission captures the delusional quality of budget politics. Everyone clamors to balance the budget, cut taxes and control spending, but no one wants to discuss programs for the over-65 population. The first is thought to be wildly popular, while the second is deemed political suicide. But the two can’t coexist, because the budget is increasingly a transfer between workers and retirees. In 1995, Social Security ($334 billion) and Medicare ($176 billion) alone account for 39 percent of noninterest federal spending ($1.3 trillion).
The balanced-budget amendment foundered on precisely the unwillingness of its Republican sponsors to face this issue candidly. They kept insisting that Social Security would be safeguarded, which is code language for exempting the elderly from the budgetary vise. Sooner or later, this will prove impossible. But if Republicans are slippery, Democrats are contemptible. They brandish – as they did in this debate – Social Security as a club against anyone trying to temper federal spending.
The resulting political climate mixes misinformation and fear. Many retirees falsely think they paid for their benefits by earlier contributions to ““trust funds.’’ This is simply untrue. New retirees will receive an average of $5 in Medicare hospital benefits for every dollar they contributed, calculates Guy King, former actuary of the Health Care Financing Administration. As for fear, President Clinton – in the Democratic tradition – suggests that balancing the budget now might mean ““dramatic cuts’’ in ““services to the elderly.’’ That would happen only if all the weight of balancing the budget fell on the elderly.
Consider. Between 1995 and 2000, the Congressional Budget Office projects that spending on Social Security and Medicare will grow from $510 billion to $719 billion, a rise of 41 percent, while the number of beneficiaries will increase about 7 percent. Suppose a budget-balancing plan for the year 2000 cut $45 billion from Social Security and Medicare. That would equal about 6 percent of the programs’ spending.
We are a nation in denial. There’s a sanctioned avoidance of problems that almost everyone knows will worsen with time. Spending on the elderly, though heavy now, is not crushing. As the baby boom nears retirement, though, it will become so. Alone, Social Security is probably manageable. It now consumes 4.7 percent of gross domestic product (roughly: our national income), reports economist Eugene Steuerle of the Urban Institute. This is projected to rise to 6.4 percent of GDP by 2030, when all the baby boomers will have reached 65.
The real crusher is Medicare. Similar projections show it growing from 2.5 percent to 7.1 percent of GDP by 2030. Together, the estimated increases in the two programs would amount to about 6.3 percent of GDP, which is more than twice the size of today’s budget deficit. To cover the increases – and the existing deficit – would require that federal taxes be increased by about half. In today’s terms, that’s a $650 billion tax increase.
Though crude, such estimates do convey correct orders of magnitude. We know we’re aging and that older people use more health care than younger people. The exact projections almost certainly won’t come to pass because before they could, changes will be made. Retirement ages will be raised, benefits will be cut, health costs will (somehow) be controlled. By acting as if the elderly aren’t a part of the budget debate we do more than perpetuate present deficits. We ensure that future adjustments will be unnecessarily abrupt and draconian. If politicians won’t discuss these problems, they can’t make gradual changes.
Medicare, for example, cannot survive forever in its present form. Efforts to curb costs by trimming doctor and hospital fees have met with only modest success. Between 1980 and 1995, Medicare rose from 5.8 percent to 11.5 percent of federal spending. One reason is that services constantly expand, driven by need and the self-interest of providers. Since 1989, spending on home health care (visiting aides and nurses) has jumped from $2.4 billion to $12.9 billion; the number of beneficiaries doubled, and the number of home visits nearly quintupled.
Gail Wilensky, a former administrator of Medicare, argues that the program must encourage more recipients to join ““managed care’’ groups, where costs are lower. On some services, higher patient copayments would encourage wiser use of health care, she says. For instance, there’s no copayment now on home health care.
It is an illusion to think that these issues can be always evaded or that Social Security and Medicare can be treated entirely separately. Both affect the same people. Despite trust funds, both are essentially financed on a pay-as-you-go basis. Connections are obvious. Would we want to raise the eligibility age for Social Security and not for Medicare? The questions involve a better sharing of burdens among generations and rewriting society’s rules to reflect lengthening life expectancy.
Our political system ignores these questions. The constitutional amendment was an ill-conceived way to deal with them. It was ill conceived because it could not create consensus – which requires a change in public opinion – and without consensus, the amendment might be flouted. But the debate showed why many in Congress embraced the amendment: we can’t control government spending unless we talk about what government spends.
