Well, the splendid little election is now over. Next up comes the debates about how to handle the “fiscal cliff”. In the grand scheme of things, though, that’s minor. The fiscal cliff only deals with income taxes and discretionary spending; it has nothing to do with Social Security and Medicare.
On the issue of those two programs, there seems to be a sharp divide. The plan laid down by Paul Ryan assumes that there’s an upcoming crisis in Medicare and Social Security, and that major changes in the payments given out are needed. Republicans by and large seem to agree with this. The Democratic position seems to be summarized by editorials like this one, which calls the crisis “phony”, “fake”, and so forth.
For actual facts on the matter, I turn to the Trustees of the two programs. Regarding Social Security, they say:
Both Medicare and Social Security cannot sustain projected long-run program costs under currently scheduled financing, and legislative modifications are necessary to avoid disruptive consequences for beneficiaries and taxpayers. Lawmakers should not delay addressing the long-run financial challenges facing Social Security and Medicare. If they take action sooner rather than later, more options and more time will be available to phase in changes so that the public has adequate time to prepare. Earlier action will also help elected officials minimize adverse impacts on vulnerable populations, including lower-income workers and people already dependent on program benefits.
…
After 2020, Treasury will redeem [Social Security] trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters of scheduled benefits through 2086.
…
The projected date of [Medicare] Trust Fund exhaustion is 2024, the same date projected in last year’s report, at which time dedicated revenues would be sufficient to pay 87 percent of HI costs. The Trustees project that the share of HI expenditures that can be financed with HI dedicated revenues will decline slowly to 67 percent in 2045
So it seems pretty blunt to me that there is a big problem. Both programs are projected to run out of money, Medicare in 12 years and Social Security 9 years after.
(James Galbraith is correct that we shouldn’t use the word “bankrupt” when talking about these programs. However, that’s a technicality. Use “insolvent”, “out of money”, or “belly up”. It still means the same thing.)
Other than that, Galbraith’s arguments look absurd. He implies that economic projections from sources such as the CBO are way off base but offers no other source of projections to contradict them. He states that medical costs can’t keep rising indefinitely, but they certainly can keep rising over the next few decades, which is what matters here. He seems to be in denial about basic facts.