A Looming Crisis in Social Security, Medicare, Medicaid? The “Fiscal Cliff” Is a Scam, Part 2

Transcript

PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Baltimore. And this is the second part of our series with Professor James Galbraith, who thinks the fiscal cliff is a scam. And he’s written an article with six reasons why he thinks so, and this is reason number two. Thanks for joining us, James.

PROF. JAMES K. GALBRAITH, LBJ SCHOOL OF PUBLIC AFFAIRS, UT AUSTIN: A pleasure.

JAY: So, once again, Professor Galbraith teaches at the LBJ School of Public Affairs at the University of Texas Austin. He’s the author of The Predator State and Inequality and Instability: A Study of the World Economy Just Before the Great Crisis.

So part two of your article, you ask the question, is there a looming crisis in Social Security, Medicare, Medicaid. So is there? That’s my question to you.

GALBRAITH: No, of course there’s not. Let’s take them separately.

Social Security is projected to rise very gently as a share of total output, total expenditure in the economy over the first half of this century. Why is that going to happen? Because the share of the population that will be receiving Social Security benefits is going to go up. That is in no sense a crisis. It’s something which has been known since the 1950s, since the baby boomers came into existence. It’s certainly not a secret to the United States census. It’s something which was taken care of in Social Security’s finances in the early 1980s.

But it constantly gets raised by people who want to curtail the extent of Social Security benefits. And there are all kinds of devices that are routinely surfaced to achieve that goal—raising the retirement age on the pretext that people are living longer and therefore they should work longer. But the reality is that two-thirds of Americans who take Social Security take it at age 62, at the early retirement—when early retirement becomes available.

Now, why is that? They—some of them are already unemployed. They don’t have a job they can stay in, and therefore they need the money. Others have been working for, let’s say, 40 years in tough jobs, jobs that require them to stand all day, jobs that require them to move heavy objects, jobs that require them to sit behind the steering wheel of a vehicle. And they’re ready to leave the labor force at that point, and so they take the early retirement deal.

When you raise the so-called retirement age, which would have no effect on, you know, someone with a comfortable position like you and me, what you’re doing to those people is you’re cutting their benefits. They’re taking their early retirement anyway, and they’ll have to take it at a deeper discount. That’s a benefit cut.

Similarly, if you change the basis in which on—of cost-of-living adjustment on Social Security (this is also something that gets trotted out and discussed in these matters), then what happens is that over time, older and older retirees find that they’re living on less and less money. And the way this works, if you introduced what was called index-linked price adjustments, is that as people with less money give up certain items of consumption—let’s say, fresh vegetables—then what happens is that that disappears from the consumption basket, and there you get only the price of canned or frozen vegetables brought in. And so the quality of life continues to deteriorate as time goes on.

And this is a way of—you know, ultimately, people reaching their ’90s will be consuming cat food, and only cat food will be in their consumption basket—not a very fair or reasonable thing to do. In fact, it’s one of the most damaging, socially destructive, really cruel measures that’s available out there. This is what people who want to fold Social Security into a grand bargain are aiming to achieve.

I think they won’t achieve it. They won’t achieve it in the next three weeks, and I hope they won’t achieve it next year, either. I hope they won’t achieve it in—you know, basically hope that Social Security’s left where it is. It’s perfectly sustainable as it is, and it does a pretty good job of keeping the elderly population out of poverty.

Okay. So Medicare, Medicaid. We can have a discussion about health care costs, but the thing about health care costs is that they apply to the whole health care system. And there’s the cost of providing particular procedures, whether you’re old or young, poor or not poor, in a public insurance system or a private insurance system. Targeting Medicare and Medicaid just because they happen to be the public insurance systems, and therefore on the federal budget, means that you’re targeting the elderly and you’re targeting the poor. It’s not a reasonable way to deal with health care.

And I think the president has basically said this numerous times, but the problem of health care costs is a problem of health care costs. It can be dealt with, but not by arbitrarily cutting back Medicare and Medicaid. If, for example, [incompr.] suggestion which has been in the news, you raise the eligibility age for Medicare, then what you’re doing is privatizing it in part. What you’re saying is that people who have employer-based insurance or other forms of private insurance have to hang on to that when they’re 66 and into, say, 67 [incompr.] they hit the age when they can shrug it off and get onto Medicare. That’s privatization. That’s what it is. And I think that should also be off the table. It certainly should not be something that is folded into a deal intended to avoid, as I said earlier, the very artificial short-term effects of the so-called fiscal cliff in the early weeks of next year.

JAY: Right, ’cause if the real issue was cutting costs, then number one, they wouldn’t have made a deal with the pharmaceutical sector not really to touch their price structure, which is one of the biggest savings you get, for example, in places like Canada with single-payer, where they can negotiate far lower pharmaceutical costs, and then if—again, if the issue really is costs, then one would address that, as you’re suggesting, not trying to privatize or change the age [crosstalk]

GALBRAITH: Absolutely. Every country in the world that has a publicly administered health care system has a cost control mechanism. It basically imposes limits on what can be charged for certain procedures. We’re very elastic about that in this country, and we allow our medical sector to be a [incompr.] of GDP. If we want it to be a smaller share of GDP, the right way to do that is not to reduce its size but to be a little bit more or maybe even substantially more rigorous about what can be charged for particular things.

JAY: But this would take on very powerful sectors of the economy in terms of their political lobbying clout, and nobody wants to do that.

GALBRAITH: Sure, sure it would. And, you know, if you ask me do I consider this to be the most important issue that we face, I really don’t. It’s an internal distributive issue. But if you ask me, would I rather have overpaid doctors and nicely, you know, overbuilt hospitals, or aircraft carriers that we don’t need or jet fighters that can never actually be flown, I’ll say I’ll take the doctors and the hospitals. I can see working on this issue, but it’s not going to be the end of American civilization if we continue to have a very large health care sector. In fact, quite the contrary. A very great economist, Paul Samuelson [inaud.] 15 percent of GDP, but it’s the best 15 percent of GDP. And I think there’s something to that.

JAY: Okay. In the next segment of our series, we’re going to talk about military expenditure. So please join us for the next segment of our series of interviews with James Galbraith, who says the fiscal cliff is a scam, on The Real News Network.

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