Journalistic Malpractice - Personal accounts don't solve the real problem

[papau]

Personal accounts -- like them or not -- don't solve the real problem. If journalists were doing their jobs, everyone would know that.....Bush's Social Security program is a hoax.

http://www.washingtonpost.com/wp-dyn/articles/A45578-2005Feb22.html
washingtonpost.com
Journalistic Malpractice

By Robert J. Samuelson

Wednesday, February 23, 2005; Page A19


It's always necessary to do the math. By this I mean that journalists need to measure politicians' promises against underlying realities, as represented by numbers. But many reporters detest math. This math phobia partly explains why the media did such an abysmal job covering the debate over the Medicare drug benefit -- ignoring the program's long-term costs -- and why they're committing a similar blunder with President Bush's Social Security plan. They're missing the obvious: The plan doesn't address baby boomers' retirement costs.

Our central budget problem, as I've noted in earlier columns, is the coming spending explosion in Social Security, Medicare and Medicaid, driven by aging baby boomers and rising health spending. In 2004 these programs cost $965 billion, or 8.4 percent of the economy (gross domestic product). The Congressional Budget Office projects that by 2030 their costs will rise to 14 percent of GDP, or more than $1.6 trillion in today's dollars. Avoiding a (nearly) $700 billion annual increase in taxes or deficits would require comparable spending cuts in other government programs. It won't happen. The projected increase in retirement spending nearly equals all federal "discretionary spending" -- a category that includes defense, homeland security, environmental programs, national parks, scientific research and much more. We're not going to eliminate all these programs.

Once you've done this math, you recognize that benefit cuts in Social Security, Medicare and Medicaid are inevitable. They're the only other way to limit massive tax increases or immense budget deficits. Moreover, the benefit cuts have to affect baby boomers, because they will be the people on Social Security, Medicare and Medicaid. The critical period occurs from 2011 to 2029, when all baby boomers (people born from 1946 to 1964) hit 65. That's when budgetary pressures intensify. So, does the Bush Social Security plan improve the budget outlook? From all indications, the answer is "no."

Bush hasn't yet offered a detailed proposal, but he is expected to build on "Plan 2" of the President's Commission to Strengthen Social Security, issued in December 2001. Workers could divert as much as $1,000 annually of their payroll taxes into "personal accounts" invested in stocks and bonds. Now, the CBO has evaluated Plan 2. In 2025 Plan 2 would reduce projected Social Security spending from 5.71 percent of gross domestic product to 5.27 percent of GDP, the agency estimates. This is a trivial cut of the combined spending of Social Security, Medicare and Medicaid. The effects of switching to personal accounts and diminishing "traditional" Social Security benefits are gradual. Indeed, because Bush plans to borrow to pay for personal accounts, his plan would probably raise federal spending in 2025.<snip>