The full article is here: (warning, requires registration)
Since I cannot recall if there is a gamers/gamers type password to access this, I’ll quote the main chunk of the article:
"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.
Judged by this arithmetic, Bush’s Social Security program is a hoax. He’s claiming to make Social Security sustainable. In 40 to 50 years, Bush’s approach might work. But in the next 25 years – when the real budget problem occurs – it does little. Bush wants it both ways: He wants to appeal to younger voters by offering personal accounts; and he doesn’t want to offend older voters (including baby boomers) by cutting their benefits. This may be smart politics, but it’s lousy policy."
Samuelson does something very weird in this column: he tries to make the column about “journalistic malpractice” (he is essentially making the charge that journalists are in-inumerate and lazy, which may be true but is beside the point), but the main thrust of the piece, as I’ve quoted, is really about why the Bush Social Security proposals are bad policy. I am not really sure why Samuelson tries to shift the focus of the article the way he does.
But he does make some very solid points.
First, no matter whether or not you believe converting social security from a public social insurance system to a private retirement investment system is a good idea, it’s very clear from the numbers that Bush’s proposals will not solve the problem which he is labelling a “crisis”, which is the long term underfunding of Social Security.
Second, focusing just on Social Security right now is asinine and short sighted. Social Security is in the best financial shape of the main federal entitlements; meanwhile Medicare is headed for budget lift-off and explosive re-entry starting in a few years and getting very serious over the next 20 years. And Bush’s Medicare program for the 2004 election cycle has only made the situation worse. On the other hand, Bush’s critics are being a bit disingenuous right now: although Social Security is NOT in a crisis at the moment and not headed for one for a long time, Medicare has a serious crisis looming which will hit sometime after 2008 (convenient for Senor Bush, no?).
I do believe it’s a good idea to discuss reform of our major federal entitlement, which, collectively, are going to blow the budget apart in the next 25 years. Social Security (both the Retirement and Disability parts) as well as Medicare and Medicaid, need to be looked at carefully from a hard numbers perspective. I’m not averse to discussing a wide variety of reforms including partial privatization. But Bush is starting on the ass-end of the problem. I understand why politically, but as policy it sucks donkeys.