Real Problems vs. Fake Problems

REAL PROBLEMS vs. FAKE PROBLEMS….Here’s a question for all you policy wonks out there: why is George Bush spending all his political energy on trying to privatize Social Security? Is Social Security really the most important problem we have right now? Is it even the most important entitlement program we have right now?

Here’s a handy chart comparing Social Security with Medicare. Decide for yourself.

Social Security


Current guess about when we start dipping into the trust fund



Current guess about when the trust fund is exhausted



Level of optimism about trust fund

High! Doomsday keeps getting pushed out, from 2029 a decade ago to 2042 today. And the CBO estimates that it’s really more like 2050 anyway.

Low! Doomsday was pulled in from 2026 to 2019 just last year. The future of Medicare looks worse today than it did a few years ago.

Current expenditures (2003)

About 4.5% of GDP.

About 2.6% of GDP

Estimated expenditures in 2050

About 6.5% of GDP.

About 9.5% of GDP.

So: Social Security is solvent for several decades at a minimum, and if the economy performs decently it may very well be solvent forever. What’s more, the cost of Social Security is only going to increase by 2 points of GDP in the next 50 years. This is not Armageddon.

Medicare, on the other hand, will start dipping into its trust fund in a mere six years. And no one thinks this estimate is going to improve: thanks to skyrocketing healthcare costs, Medicare might very well be in worse shape than we think it is. As a result, the cost of Medicare is likely to increase by a staggering 7 points of GDP over the next 50 years.

Why, then, are we obsessing over Social Security, which is not really that big a deal, and ignoring Medicare, which has serious problems in both the short term and the long term?

As near as I can tell, the answer is twofold. First, Social Security provides Republicans with a chance to introduce a conservative nostrum that they’ve long pined for: private accounts. We don’t need them, and they won’t actually do anything to solve whatever problems Social Security might have, but an invented crisis is a good excuse to introduce them anyway. Conversely, there’s no way to plausibly pretend that private accounts will save Medicare, so why bother?

Second, Social Security is relatively easy to deal with since it’s just a pure funding issue: you can raise taxes, cut benefits, or borrow more. It’s pretty simple to grasp.

Conversely, Medicare reform is really, really hard. You’ve got the same funding issues as Social Security, except much bigger and much closer; and in addition you also have to face up to spiralling healthcare costs. And figuring out a way to contain healthcare costs is a subject that nobody wants to tackle. Not Democrats and definitely not Republicans.

Bottom line: we have one real problem and one fake problem. The fake problem is, well, fake, but it provides a plausible excuse to do something conservatives have long wanted to do anyway. The real problem, on the other hand, is, um, real, but fixing it would take genuine political courage.

So which problem do you think George Bush has decided to tackle?

POSTSCRIPT: On a practical note, I should add that I guess I’m just as glad Bush is ignoring Medicare. It’s true that it needs reform, but considering the general level of political corruption and contempt for policy that attends any George Bush “reform,” I’d just as soon he left it alone for someone else to worry about.