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The Wrong Entitlement Debate

By Dan Froomkin
11:45 AM ET, 05/13/2009

The release of the latest official status report on the Social Security and Medicare trust funds -- which unsurprisingly finds that both are suffering somewhat due to the recession -- has spawned the predictable headlines of doom.

After all, the way things are going now, Social Security won't be able to pay retirees full benefits by today's rules -- in 26 years. Medicare, I'll grant you, is a vastly bigger problem, as a lot needs to be done in the next nine years to prevent a deficit.

What I don't understand, however, is why almost no one is focusing on the more immediate problem, namely the extraordinary damage that the recession and foreclosure crisis have done to the nest-eggs of the the current crop of retirees and near-retirees. Why is there no discussion about a short-term boost in benefits, especially for lower-income people? After all, isn't it reasonable to expect that enormous declines in the stock market and home values are translating into more severe poverty for the elderly?

Alas, that's not what Washington is talking about. As Amy Goldstein writes in The Washington Post, the new numbers "intensify a political debate, gathering strength among Democrats and Republicans, over how quickly President Obama should tackle Social Security when health-care reform is his administration's most urgent domestic priority....

"Congressional Republicans and some Democrats seized upon the findings to argue that the administration should work rapidly to ward off the looming insolvency of Social Security and Medicare."

Robert Reich writes a little reality check for TPM Cafe: "Even if you assume Social Security is a problem, it's not a big problem. Raise the ceiling slightly on yearly wages subject to Social Security payroll taxes (now a bit over $100,000), and the problem vanishes under harsher assumptions than I'd use about the future....Social Security would also be in safe shape if it were slightly more means tested, or if the retirement age were raised just a bit. The main point is that Social Security is a tiny problem, as these things go.

"Medicare is entirely different. It's a monster. But fixing it has everything to do with slowing the rate of growth of medical costs -- including, let's not forget, having a public option when it comes to choosing insurance plans under the emerging universal health insurance bill....

"Look more closely and the real problem isn't even health-care costs; it's a system that pushes up costs by rewarding inefficiency, causing unbelievable waste, pushing over-medication, providing inadequate prevention, over-using emergency rooms because many uninsured people can't afford regular doctor checkups, and spending billions on advertising and marketing seeking to enroll healthy people and avoid sick ones."

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