Thoma Takes on Robert J. Samuelson
By Arnold Kling
[Columnist Robert J.] Samuelson’s continual focus on the budget deficit obscures the real problem. It doesn’t matter whether health care is in the public domain or the private domain, the costs will be daunting either way if they continue on their present trajectory, so finding ways to hold down health care costs is where the focus needs to be.
If Samuelson really wants to help, he can quit writing the same misleading and counterproductive column over and over again. Quit saying “cutting retirement benefits or raising taxes” are the “obvious choices” when it’s not obvious at all. Cutting retirement benefits or raising taxes will do nothing to reign [sic] in health care costs so these measures do not address the main problem.
Thoma thinks that the core issue is rising health care spending. Samuelson thinks that the core issue is future obligations to retirees.
While Thoma’s viewpoint is expressed with strong rhetoric, its substance is not so persuasive. Why is high spending on medical care a public policy problem at all? If the affluent were spending their own money to purchase health insurance or to pay for medical services out of pocket, I would see no need for government to “rein in” such spending.
The public policy problem arises because our government allocates health benefits based on age rather than based on need. The public policy challenge is that we have obligated too much in future benefits to retirees relative to our likely ability to collect taxes. In that regard, I think that Samuelson has correctly identified the core issue.
UPDATE: PGL writes
The point that both Mark and Dean were making was that we should separate the Social Security and health care discussions.
Both Social Security and Medicare rely on the same tax source for meeting obligations to future seniors. Because we allocate more payroll taxes to Social Security than to Medicare, it looks like Social Security will be nearly in balance in 2040, and Medicare won’t. But if we allocated more payroll taxes to Medicare instead, it would be the other way around.
There is nothing wrong with taking a holistic look at the promises that we are making to seniors. If you think that you can pull a rabbit out of your hat and slow the rate of increase in health care spending, then that holistic outlook will improve. For that matter, there are other rabbits to pull out of a hat, such as high productivity growth.
But until we demonstrate that we can pull a rabbit out of our hat, coming up with a realistic combination of tax rates and promises to future beneficiaries seems like a prudent thing to do. Here are four options:
1. Reduce promises to future seniors, and only increase those promises if economic conditions warrant.
2. Maintain promises to future seniors, and tell everyone to expect much higher tax rates in the decades ahead.
3. Raise taxes now, to “save” for the future.
4. Blame the problem on rising health care costs.
I don’t care for (3) very much. PGL’s criticism of the 1983 “rescue” of Social Security is one that I would tend to apply generically to the approach embodied in (3). It’s difficult to hold politicians to a promise to save now, rather than spend and/or cut taxes elsewhere.
I favor (1), of course. I could respect you in the morning if you picked (2). The case for (4) is the one that I thought Thoma was making, and I continue to find that evasive and unsatisfying.