Monday, February 22, 2010

A Small Point

Paul Krugman asks:
Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?

Whenever I hear that Medicare, Medicaid, and Social Security are popular and in the same breadth that they are running out of money I always marvel. Of course programs that provide more benefits than they require in taxes are popular. It's the free lunch perception.

Now, astute readers will point out that Social Security has a trust fund that was built up, and therefore the program has actually paid out less than it took in for many years and it was still popular. Ah, but those people paying in also expected money back in return. Yet, there isn't really enough to pay the boomers. And, even worse, since the supposed social security trust fund lent the money to the government, which spent it, you end up with even more of a free lunch perception because not only are promised benefits higher than the taxes allocated toward them, but also the additional money went into government spending.

I guess my point here is that running up the credit card is fun and popular. It's when the bill comes due that the problem arises. That the programs are popular is not terribly surprising because the costs appear far lower than the benefits. However, this is not to say that the programs themselves are not worthwhile or popular on the merits. I just think that when Democrats and liberals mention the popularity of those programs and therefore we need to solve the fiscal problems they might want to think that perhaps part of the popularity is due to the fiscal problems. If the actual economic costs were made clear perhaps they wouldn't be as popular. My guess is that even correcting for that, they'd still enjoy majority support.


rahowe said...

I guess I am not sure why you select Democrats for criticism in this. It was Republican President George Bush who added a prescription drug benefit to Medicare without any revenue source. This is the President who added the most (so far) to the public debt. In 2004, we reelected Bush over a Democrat who promised to put Social Security in a "lock box" and prohibit the use of its revenue for other government functions. So, we chose the "free lunch" Republican over the "pay the bill" Democrat.

It was Michael Steele, Chairman of the RNC, who, among other Republican leaders (Grassley, for example), spent the past several months claiming to be protecting Medicare against cuts by Democrats, warning that Democrats were going to kill those boomer grandmothers by denying them benefits.

This isn't a partisan created problem and won't be a partisan solution--unless Republicans leave the solving exclusively to the Democratic politicians as they seem inclined to do.

FLG said...

Let's be clear. The programs were created by Democrats and liberals. Indeed, they are among their most proud historical accomplishements. They take great pride in the popularity of these programs. My point is that some of that popularity may be due to the fiscal imbalances, which makes fixing them something that may undermine the programs' popularity.

Bush did try to reform (or gut, depending on your POV) Social Security and was shot down. The Medicare Drug benefit, while irresponsible and stupid, is not the majority of the problem. Yes, it exacerbated it, but the structural problems pre-existed that.

"This isn't a partisan created problem and won't be a partisan solution"

My point here is that the Democrats, and Krugman in particular and repeatedly, point to the popularity as evidence that the problem should be solved largely with tax increases, not benefit cuts. That is a partisan solution. I also was pointing out that if the tax increases demonstrate the true cost, then the programs risk becoming less popular.

Both tax increases and benefit cuts (probably through increasing the retirement age) will need to be part of the solution regardless of their current popularity.

FLG said...

One more thing:
"In 2004, we reelected Bush over a Democrat who promised to put Social Security in a "lock box" and prohibit the use of its revenue for other government functions."

If the election were just on this one policy position, then this would be more powerful. The problem, as Obama is finding out now with health care, is that even if you make a big point out of a policy position it is just one of many and policy positions are just one of many factors in who wins an election. We didn't "chose the "free lunch" Republican over the "pay the bill" Democrat." We chose Bush over Kerry, not a referendum on social security lockboxes.

rahowe said...

But, again, Steele, et al, used the popularity of Medicare to gather support AGAINST cuts proposed by Democrats. And, if "free lunch" is the sole reason the program is popular, Republicans should allow tax increases that may later lead to program cuts, which, contrary to their cynical manipulation of the debate this past summer, they desire. I will be very interested to see what they bring to the table, Thursday.

Bush made a few speeches about Social Security in early 2005, convinced a majority that they did not want him messing with it, and then shut up. It was a meager effort at best.

George Pal said...

“Republicans should allow tax increases that may later lead to program cuts...”

George Bush père did just that and found, to his dismay, “may later” is a political colloquialism for “sucker”.

rahowe said...

That is to say, we thought the additional cost was worth it, as budget surpluses and a long economic expansion showed. Tax cuts by the son did not produce nearly the same effects.

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