• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • Confronting the Entitlement Crisis Deniers

    Liberal author Robert Kuttner doesn’t believe in the entitlement crisis. His argument – reflecting conventional far left thinking on the issue – goes something like this:

    1. Conservatives exaggerate the entitlement problem by using shady figures.
    2. Social Security is just fine, so don’t worry about it.
    3. Medicare is a problem, but only because of rising health care costs. Once the country embraces socialized medicine the costs will fall, thus solving the problem.
    4. History proves this correct because the government ran up heaps of debt during World War II setting the country on the path to prosperity.

    Let’s face this argument point by point.

    First, the figure Mr. Kuttner finds problematic is the 75 year present value of future expenditures in excess of future revenue. In other words, this is the total current dollar amount the government has promised minus the total amount of revenue they expect to take in. The Treasury Department explains “While these expenditures are currently not considered Government liabilities, they do have the potential to become liabilities in the future, based on the continuation of the social insurance programs’ provisions contained in current law.”

    The often quoted statistic is that Medicare has $36.3 trillion and Social Security has $6.6 trillion in unfunded liabilities. These figures are taken directly from the 2008 Financial Report of the United States Government (see page 58-59 of the pdf: “Present value of future expenditures in excess of future revenue”). Opting to examine the nation’s long-term financial situation is hardly “shady accounting.”

    Second, Mr. Kuttner believes Social Security to be nothing to worry about. Unfortunately, according to both the Social Security Trustees and the Congressional Budget Office Social Security is set to run annual cash flow deficits within the next ten years. Given the government has already sucked the Social Security Trust Fund dry, leaving behind IOU’s, the situation will soon become very real. The question then becomes does the government respond by raising taxes, cutting benefits, or implementing meaningful reform? The answer from the liberal camp is to sit back, relax, and do nothing.

    Third, the Obama health care plan only reduces cost if specific criteria are met. As Professor Mark Pauly, a prominent health care economist at the University of Pennsylvania, explains:

    The main problem is that these [popular, common methods] are “if only’ savings, which can be achieved “if only’ certain events would occur, such as physicians’ being willing to adopt health IT, consumers being willing to accept changes in diet and exercise. … There is little evidence that there are known methods to cause the “if only’ behavior to occur, and to occur quickly on a large enough scale to matter.”

    Heritage Foundation analysts also point out:

    The efficacy of these “if only’ savings has been seriously questioned by the Congressional Budget Office (CBO). The CBO has reported that evidence of disease management, comparative effectiveness, health information technology, or prescription drug re-importation reducing costs quickly and appreciably is lacking.

    Finally, Mr. Kuttner recalls his own version of American history. He states:

    History provides a parallel. At the end of World War II, the public debt was about 120 percent of GDP — about three times today’s ratio…. all that debt went to recapitalize American industry, advance science and technology, retrain our unemployed and put them to work.

    And I thought all that debt went to defeat the axis powers. My mistake.

    Posted in Economics [slideshow_deploy]

    12 Responses to Confronting the Entitlement Crisis Deniers

    1. Spiritof76, New Hampshire says:

      Mr. Robert Kuttner must be on some sort of happy pill or heavily drunk with Kool-aid to have lost common sense let alone to indulge in partisan spin.
      How in the hell can you not come to grips with Social security not going broke? It is littered with IOU’s with the government spending the trust fund like there is no tomorrow. May be donkeys will accept that there will not be any problem with Soc. security since they like to eat paper. That is all we will be left with.
      Yeah, the socialized health care will take care of any shortfall in Medicare by simply denying any service to seniors since they are not that useful to the society anyhow. So, we will have unlimited abortions at the beginning of life and purposeful killing of the seniors at the end. Isn’t that a communist utopia. Liberals like Kuttner won’t worry about those things as the liberal elites have one rule that grants them unlimited privileges while the ordinary folks will have the oppressive rule as a matter of expected sacrifice for the good of the country.

    2. Dennis A. Social Cir says:

      This whole thought is to stupid to even be discussed. It is the thinkig of "messed" up liberals and the working man sits on his butt and lets them put this country in the ground. WAKE UP FOLKS AND SMELL THE BURNED COFFEE, THIS IS YOU FUTURE WE ARE TALKING ABOUT. TAKE CHARGE NOW WHILE WE CAN, VOTE TO PUT THESE PEOPLE OUT OF OFFICE BEFORE IT IS TO LATE.

      I know people are sayin the dems and obama deserve a chance and the conservatives just want them to fail. I think the proof is in the puffing, they have us headed down the path of ruin for many years to come.

    3. Robert Mississippi says:

      Just go back to the LBJ era and you will see many newspaper articles written about the huge surpluses in the Social Security trust fund. It is a statistical fact that as time passes there are fewer and fewer people and since baby boomer have now just started to retire, the question is where did the money go? First LBJ could not keep his hands off the money and it went to his Great Society program. Secondly, people like Ted Kennedy liberalized benefits under the Social Security program was never intended to support. Now all that is left is IOUs to those of us who contributed to the program.

      Government run health care will be cheaper!! I seriously doubt that – just imagine adding 60 million people to the system without any more hospitals, doctors, or nurses. This will be nightmare because there will not be enough health care providers to go around. You will see people taking advantage of the system (just like welfare) and going to the doctor every day and for things like a hangnail. There will have to be health care rationing. Abortions will be allowed because the person is young while the older person who has a heart attack will go without because they are older.

      Our current situation is that 20% of the population pays 80% of the taxes. That did not occur in WWII – people worked and paid taxes and we overcame obstacles like having the rubber producing countries conquered by the Japanese leaving us in a shortage by develop synthetic rubber.

      Instead today [because of the housing boom (that assumed prices of homes would always increase), state governments who spent like crazy (because they thought property taxes would never stop rising), the plastic credit card industry handing out cards like candy to anybody and the liberalization of government spending under the Social Security program] with an accumulated 300 trillion dollars of debt in the economy.

      Until the debt and welfare issues are resolved adding trillions of government spending is not going to cure the problem. There just is no free money in the economy.

    4. duelles, Santa Fe, N says:

      I love the coments here. Obama had his chance with me. When my 91 year old mother's beloved XON reported record earning s, Mr Obama said He is clue-less! He does not know from where money that becomes taxes or my mom's living expenses come from.

      His time has passed. He is a fool.

    5. Mike Sheahen, Hickor says:

      In the article above is yet more example of how the Left is so blindly devoted and determined to have their Marxist Communist/Socialist government elitist way that they will do anything they can imagine to deny, ignore, and omit any facts to the contrary, and even go so far as to presume to re-write history, and re-define words and things, all in their rather Orwellian "newspeak", "oldspeak", "doublethink", and "doublespeak" way.

      How thus Orwellian of the government elitist Left indeed, complete with their efforts to deny facts, re-write history, and even re-define words and invert things, all for their Leftist/totalitarian government eltitist agenda.

    6. Jamey, Central Calif says:

      The biggest problem that I see as the next generation comming into my prime is that the tipping point is rapidly approaching. Right now I pay for 4 welfair families in taxes in one year. I am now told that it is my "patriotic duty" to pay more. All this talk is just that, talk. I am rapidly approaching the point at which I will be able to "barely" pay the current bills I have and have zero discressionary income. At that point, all the talking about what is right and wrong is of no point. I WILL NOT pay at that point. I will fold the doors and jump on the teat and start sucking away. This is a two fold problem as now one more is on the dole, but more importantly, is the loss of 4 welfair recipiants being paid for. Multiply me by 10,000. This is what is comming. I have never recieved any assistance from the state nor the federal government. If I can break it though I will. If a man will work let him eat. When are we going to hold people accountable?

    7. Judie, North Carolin says:

      I am a 60 year old former educator. I never made a high salary but I worked hard and saved diligently for my retirement. Since that time, I have worked as a consultant, traveling all over the U.S. to work with needy school districts. It is hard and exhausting work having to travel and stay in cheap motels. Now I am faced with the worst dilemma of my life: if I keep working, Obama and his cronies will take it all in taxes. If I quit, I won't have enough money to live on in the future. My home is worth half of what it cost (although, thankfully, it is paid for). I couldn't sell it right now if I wanted to and yet it doesn't look like I will have enough to be able to afford to live in it. At my age, I don't have time to recover from the economic debacle. I don't feel and have never felt that I am "entitled" to anything. I have given to charities and to my church. Now, I can't even afford to do that. What is someone like me to do in the future? I am frustrated, depressed and feel totally helpless. It seems like there is no way for the common person to be heard. This administration is taking us down a path from which there will be no return. How can we stop this runaway train?

    8. pandN says:

      Social Security retirement benefits are not entitlements. I earned them by paying in 40 years.

      Now, if I earn over $25K, I have to pay them back.

      I pay taxes again on these benefits also… only country in the world that taxes SS twice! And some think this is an entitlement? The gov't drained it… pay back the IOU's and it might survive.

      Give every american over age 50 1 million (40M cost).. each buys 1 foreclosed house, 1 american made car, and quits their job if they have one.

      Cost (40Million).. with 40M homes off the books, 40M new cars on the road, and 40M new jobs created. Take us off the SS books, and watch us put america back on the right track real fast.

    9. How I Lost Thirty Po says:

      Great post! Just wanted to let you know you have a new subscriber- me!

    10. Pingback: House Liberal: Except for a few financial problems, Medicare works great! : The American Pundit

    11. Pingback: Below The Beltway » Blog Archive » Democratic Congressman Admits: He Wants Medicare For Everyone

    12. bill says:

      As of now the Health Care Insurance bill is going to be allowed to be in debate in U.S. Senate. This is $1 trillion worth. A drop in the bucket compared to $36 trillion of Medicare and maybe another odd $10 trillion on interest to pay for the debt.

      I have been blogging that it does not matter if government gets into the health care insurance business. It will supposedly be effective in 2013 but I give it perhaps ten years at most of longevity.

      The entitlement crisis is going to either force government to tax everyone at double or triple the tax rate or will have to just shut down entitlement spending and use the current tax levels just to pay off the debt. And for those people who think low incomes won't be taxed, think again. Government will start taxing the low incomes again so that no more than 15% of the working-age population will not be taxed.

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.