Over at Salon, Michael Lind has a lengthy critique of my column on how the welfare state is destroying America (the first in the Washington Examiner’s five-part series). Lind uses some harsh language, titling his article, “How conservatives lie about government.” He accuses of me of being “intellectually dishonest” and a “right-wing propagandist” who is part of an effort to brainwash people about the nation’s debt. I’m going to take a few moments to respond, because it’s an important debate that deserves more elaboration than I was able to provide in one 600-word column. But I won’t engage in such name calling.
Let me start with a relative area of agreement. Lind argues that rising health care costs are a bigger problem to our budget than the aging population. I agree, and nowhere in my piece do I say differently. In fact, in a paragraph that he even quotes from, I mention both issues: “With health care costs rising and the population aging, America’s welfare-state obligations are bringing the country to its financial knees.” The Congressional Budget Office also cited both issues in its June 2011 long-term budget outlook: “Two factors account for the projected increases in outlays for the government’s large entitlement programs: aging of the population and rapid growth of health care spending per capita.”
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At another point, Lind argues that, “In the real world, of course, today’s national debt has nothing to do with Social Security, whose trust fund has a surplus that will last for decades, with the precise date of the trust fund’s exhaustion depending on the rate of general economic growth.”
I’d agree that compared to Medicare and Medicaid, Social Security is less of a problem. But Lind overstates his case to say that the program has “nothing” to do with our nation’s debt.
Lind touts the fact that that Social Security has a dedicated revenue stream in the form of payroll taxes. But all of the money ultimately comes from the same bank account anyway (or in this case, the collective bank accounts of American taxpayers). When the cost of benefits exceeds the amount of payroll taxes collected, the money to pay current retirees has to come from somewhere. This is a fact exposed by the fight over how to pay for the payroll tax holiday President Obama has pushed.
Acknowledging this much, Lind asks, “True, the federal government has to raise the tax revenue to repay the money it borrowed from the trust fund — but then, the federal government has to repay all of its creditors, domestic and foreign. What’s wrong with that?” This doesn’t change the underlying reality that the reason why that debt exists in the first place is a result of government spending.
In fiscal year 2011, Social Security cost $726 billion, according to the CBO, making it the most expensive federal program – even more costly than the entire Department of Defense budget. Over the next decade, it will cost nearly $10 trillion – and the growth will explode after that. To say that the biggest component of the federal budget has nothing to do with the debt is simply absurd.
When Social Security was first created in 1935, the combined payroll tax contributed by workers and their employers was 2 percent. Since then, it’s gone up about 20 times, to 12.4 percent. Were it not for Social Security, in other words, either workers would have higher wages during their years of employment, or the government would have more tax revenue available to spend on other priorities.
Lind also slams me for not blaming the Bush tax cuts, wars and the weak economy for our current debt problem. I wrote about that argument in greater detail before. But the important point is that even if you went back in time to 2000 and erased all of the Bush era policies, it still wouldn’t change the long-term need to do something about entitlements. As the CBO put it in an October 2000 report:
Lind also accuses me of writing “about medium-term and long-term problems as though they were present-day emergencies.”
Yet there’s a very good reason for that – as most any budget analyst would recognize, the longer we wait to address our problems, the more drastic the remedies become. So it’s simply more responsible to treat them as present day emergencies. As the CBO wrote in June 2011:
Here it is in graph form, and to get a sense of what these numbers mean, that 12.5 percent number adjusting for today’s GDP would translate into $1.8 trillion, or about half of the federal budget. Last year’s government shutdown fight was over $40 billion in cuts – this would represent a combination of taxes and/or spending cuts 45 times greater in magnitude.
Lind also describes me as one of the “apocalyptics on the right” for warning that if U.S. debt continues to grow at projected levels, that at some point, bond holders will lose their appetite for our debt. He notes that this didn’t happen in response to last summer’s credit downgrade by Standard and Poor’s. “Evidently the bond markets think America is the world’s safe haven and are not terribly worried about long-term American entitlement costs,” he said. That’s not quite right. When I’ve spoken to bond investors, they’ve told me that they are deeply concerned about our long-term debt burden.
The reality is that for now, given how bad off the rest of the world is, America is still considered “safe” relative to the other bad options. But just because that’s been true up until now, it doesn’t mean it will stay that way forever. Assuming that what has been the case in the past will always be the case in the future is the same flawed reasoning that investors and policy makers used during the housing bubble that precipitated the recent economic collapse. America is not immune to the laws of finance. At some point, if left unchecked, our troubled balance sheet will scare away investors. If I could predict precisely when that would happen, I’d quit my job and become a bond trader.
One final point. In my piece, I referenced the stratospheric estimates the CBO made for debt and the theoretical marginal tax rates needed to sustain it. As I wrote, these were simply “on paper.” But Lind responds: “The experts of the CBO know perfectly well that the United States is never going to have a national debt of 716 percent of GDP or marginal tax rates of 88 percent. Long before anything like these absurd numbers were reached, policies would be changed to cut costs in medical spending.”
That’s an odd argument for Lind to make, considering it’s the entire point of my article – that we’ll need to make policy changes in order to avoid a disastrous outcome. So the question is, will we pretend that the problem doesn’t exist, as Lind seems to want to, and wait until we’re in the midst of an emergency to start making draconian policy changes? Or do we want to take serious steps to tackle the problem now, when there’s still time to ease in more modest changes?
