Samuelson on Debt & the Elderly

Why are we in this debt fix? It’s the elderly, stupid.  Samuelson's take.  {Excerpt & highlights}.

If leadership is the capacity to take people where they need to go — whether or not they realize it or want it — then we’ve had almost no leadership in these weeks of frustrating and maddening debate over the budget and debt ceiling. There’s been an unspoken consensus among President Obama, congressional Democrats and Republicans not to discuss the central issue underlying the standoff.......{W}e’ve heard almost nothing of the main problem that makes the budget so intractable.....It’s the elderly, stupid.

By now, it’s obvious that we need to rewrite the social contract that, over the past half-century, has transformed the federal government’s main task into transferring income from workers to retirees. In 1960, national defense was the government’s main job; it constituted 52 percent of federal outlays. In 2011 — even with two wars — it is 20 percent and falling. Meanwhile, Social Security, Medicare, Medicaid and other retiree programs constitute roughly half of non-interest federal spending.

These transfers have become so huge that, unless checked, they will sabotage America’s future. The facts are known: By 2035, the 65-and-over population will nearly double, and health costs remain uncontrolled; the combination automatically expands federal spending (as a share of the economy) by about one-third from 2005 levels. This tidal wave of spending means one or all of the following: (a) much higher taxes; (b) the gutting of other government services, from the Weather Service to medical research; (c) a partial and dangerous disarmament; (d) large and unstable deficits.

Older Americans do not intend to ruin America, but as a group, that’s what they’re about. On average, the federal government supports each American 65 and over by about $26,000 a year....At 65, the average American will live almost 20 more years. 

....{President}Obama poses as one brave guy for even broaching “entitlement reform”...What he hasn’t done is to ask — in language that is clear and comprehensible to ordinary people — whether many healthy, reasonably well-off seniors deserve all the subsidies they receive. That would be leadership.....Tea Party advocates broadly deplore government spending without acknowledging that most of it goes for popular Social Security and Medicare.

{F}acts are no match for the self-interest of about 50 million Social Security and Medicare recipients and a natural sympathy for older people and for people who eagerly look forward to retirement....What sustains these contradictions is a mythology holding that, once people hit 65, most become poor......But the premise is wrong....The Kaiser Family Foundation reports the following for Medicare beneficiaries in 2010: 25 percent had savings and retirement accounts averaging $207,000 or more; among homeowners (four-fifths of those 65 and older), three-quarters had equity in their houses averaging $132,000; about 25 percent had incomes exceeding $47,000 (that’s for individuals, and couples would be higher).

The essential budget question is how much we allow federal spending on the elderly to crowd out other national priorities. All else is subordinate. Yet, our “leaders” don’t debate this question with candor or intelligence.....We need to ask how much today’s programs constitute a genuine “safety net” to protect the vulnerable (which is good) and how much they simply subsidize retirees’ private pleasures.

Our politicians make perfunctory bows to entitlement reform and consider that they’ve discharged their duty, even if nothing changes....We need to ask the hard questions: Who deserves help and who doesn’t? Because Social Security and Medicare are so intertwined in our social fabric, changing them could never be easy. But the fact that we’ve evaded the choices for so long is why the present budget impasse has been so tortuous and why, if we continue our avoidance, there will be others.

Link:  Why Are We In This Fix, It's The Elderly Stupid!