America's Largest Newspaper Launches a Nasty Attack on Grandma and Grandpa
The conservative playbook isn't difficult to decipher. They rely heavily on the politics of resentment – point to someone in our society, claim they're a lucky-duck using unverifiable anecdotes or cherry-picked data, and then urge people to ask, "Why does that person have it so good when I'm busting my ass to make ends meet?"
It was apparent in Ronald Reagan's “welfare queen” rhetoric, and also in the ubiquitous references to “young bucks” buying T-bone steaks with their food-stamps. Now the Right's using the exact same play for those greedy public employees supposedly living large on their fat salaries.
This week, the Wall Street Journal featured an excellent example of the genre by John Cogan, a fellow at the corporate-backed Hoover Institution. The piece, titled, “The Millionaire Retirees Next Door,” is a shining testament to the dishonesty surrounding our discourse on “entitlements.”
Cogan's pitch is this: “The typical husband and wife who reach age 66 and qualify for Social Security ... will begin collecting a combination of cash and health-care entitlement benefits that will total $1 million over their remaining expected lifetime.” They'll get an average of $1 million in cash and health-care bennies over the rest of their lives, which makes them millionaires! Why aren't you?
What's more, “The typical 66-year-old couple and their employers, on their behalf, have contributed nearly $500,000 in payroll taxes.” In other words, they're going to pull in a half-million more than they paid! “We cannot even remotely afford to make good on these promised benefits ...[to] so many million-dollar couples,” he writes. “The benefactors will be a generation of younger workers who are trying to support themselves and their families while paying taxes to finance the rest of government spending.” Won't somebody think of the children?
All of this, Cogan says, is according to his own calculations based on government data. It's all wrong, however, and while it's often difficult to say with any certainty whether someone is intentionally lying to people or simply making an honest error, in this case it's clear.
Cogan's sleight of hand is simple: when he gives the amount this average couple paid into the two programs, he adjusts for inflation to current dollars. On the benefits side, he doesn't – he uses future dollars, which results in a larger number. John Cogan is a professor of public policy at Stanford University; every one of his students knows that he or she would get an F comparing inflation adjusted numbers on one side of the ledger to nominal dollars on the other – it's apples and oranges and it's about as mendacious as one can get.
He tries a similar trick with this grievance:
In 1978, Congress instituted automatic cost-of-living adjustments for Social Security. That's reasonable. But Social Security's method of automatically increasing benefits to successive cohorts of retirees by more than inflation makes less sense. It means that the average worker who retires this year receives a monthly benefit that is about 23% higher after adjusting for inflation than the monthly benefit received by the average worker who retired 20 years ago. The average worker who retires 10 years from now is, in turn, promised an initial benefit at retirement that is 14% higher after adjusting for inflation than the average worker who retires today.
Congress passed an automatic cost-of-living increase in 1972, not 1978. COLA is based on the rate of inflation, so benefits aren't “automatically” increased faster than the rate of inflation. The reason retirees today will take home larger benefits than those who left the workforce 20 years ago reflects the higher wages they earned. The same is true of those who will retire 10 years from now.
Let's pause for a reality check. It's true that, according to the Urban Institute (which adjusts for inflation), Cogan's average two-earner couple will receive $882,000 in combined benefits over their golden years. But we need to disaggregate that figure; the average monthly Social Security benefit for retirees this year is $1,179 per month. Multiply that by two, and you don't exactly end up with Lifestyles of the Rich and Famous.
Of course, it doesn't matter what an “average” two-earner household pays in and takes out; lots of families aren't average, and the only thing that matters is the system's overall solvency. And the Social Security administration has taken in more than it's paid out for all but two of the last 30 years. It's run significant surpluses, and hasn't added a single penny to the deficit. This year's surplus is projected to be $113 billion.
Cogan says we “can't afford” these benefits. But in the United States, while people who work until age 65 will see only 40 percent of their incomes replaced by Social Security, the average replacement rate among the 31 countries in the Organization for Economic Cooperation and Development (OECD) – the “rich countries club” – is 57 percent. The U.S. ranks 27th out of 31 in that measure, and by 2030, the average income replaced by Social Security will fall to 32 percent. Cogan never bothers to explain why we “can't afford” benefits that are far stingier than those enjoyed by the citizens of Portugal, the Slovak Republic or Poland – all countries with significantly less wealth than we have.
While Social Security's finances are sound and will remain so for the foreseeable future (and possibly forever), Medicare is a different story, which is why mendacious granny-bashers always conflate the two programs.
Like every corporation in America that offers its employees private health insurance, Medicare faces spiraling costs. But despite an aging population adding a lot more beneficiaries, health-care costs have grown significantly slower in the Medicare system than it has in the private sector over the life of the program, as this data from the Congressional Budget Office illustrates:
Cogan paints the rise in costs as a product of feckless politicians bowing to their greedy and all-powerful constituents. He complains that “Medicare premiums paid by senior citizens once covered half of the cost of physician and related services. They now cover one-fourth. Copayments once covered nearly 40% of these services' costs. They now cover only 20%.” Premiums haven't decreased; the smaller share reflects the fact that a good portion of those rising costs haven't been passed on to seniors.
Cogan wants to do something about that. Rather than offer suggestions for getting health-care costs under control, he proposes shifting them onto the backs of grandma and grandpa.
To fix Medicare, we must move away from the current system of fee-for-services and low copayments. First and foremost, copayments should be increased significantly. Medicare recipients need to have more skin in the game if they are to become cost-conscious medical consumers.
The proposal echoes the GOP's budget plan, under which the Congressional Budget Office says seniors would end up paying almost twice as much out of their own pockets even while the total cost of insurance would end up being higher.
The idea is based on some old-fashioned right-wing boilerplate – turn patients into “consumers,” and the free-market fairies will lower health-care costs with their magic pixie dust. But as Paul Krugman noted, the notion of the savvy consumer falls apart because making health-care “decisions intelligently requires a vast amount of specialized knowledge.”
Furthermore, those decisions often must be made under conditions in which the patient is incapacitated, under severe stress, or needs action immediately, with no time for discussion, let alone comparison shopping....
The idea that all this can be reduced to money — that doctors are just “providers” selling services to health care “consumers” — is, well, sickening. And the prevalence of this kind of language is a sign that something has gone very wrong not just with this discussion, but with our society’s values.
Ultimately, these are just the details. The really big lie is a simple bait-and-switch: we face high deficits, which Cogan and a legion of his fellow conservatives desperately want you to believe is the result of crazy politicians handing out fat checks to everyone and their cousin. The reality, of course, is very different.
Here's a picture that tells a 1,000 words about the true causes of our deficit – please note the absence of Social Security or Medicare.