Blog on the Run: Reloaded

Wednesday, February 23, 2005 11:46 pm

Always do the math. Even when you’re an economist.

Filed under: Aiee! Teh stoopid! It burns! — Lex @ 11:46 pm
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You already know what the first three rules of investigative reporting are.* Rule No. 4? Always read the documents. And either Rule No. 5 or Rule No. 4A is: Always do the math. This is particularly important when writing about taxes and government spending.

The Washington Post’s Robert Samuelson agrees, I’m happy to report: “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.”

So why didn’t he do it?

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.

Samuelson, although identified here as a political columnist, is an economist, for God’s sake. And yet it somehow has escaped his notice that if we do nothing at all to Social Security — nothing at all, meaning no benefit cuts, no tax increase, no borrowing, and even taking into account the likely need for increases in spending on benefits — it can continue to pay full benefits to 2042, more than a decade later than the “critical period” Samuelson is worrying about.

Medicare and Medicaid are indeed disasters waiting to happen. But the current budget deficits and trade deficits, which he doesn’t even address, are disasters happening right now. Social Security? Pfffft. Yeah, we’ll need to do something eventually. But right now and for the next couple of decades or so, we’ve got much bigger problems. And surely Samuelson is smart enough to know it.

His column comes with the headline “Journalistic malpractice.” Truth in advertising, I guess.

*OK, maybe you don’t. They’re: 1) Follow the money. 2) Follow the money; and 3) Follow the money.

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