A step from the left on entitlement reform

Isabel Sawhill and Harry Holzer correctly identify the cost to society (and also in terms of reduced government services) that’s created by soaring entitlement costs in their Washington Post oped Saturday, but their anodyne suggestions for addressing the problem manifest the difficulty in tackling this problem.

The problem has been litigated on this blog before: we have a large cohort of Americans entering their retirement ages, they’re living longer than ever before, and their healthcare costs continue to rise. Holzer and Sawhill diagnose this problem, and point out that this is pernicious from a liberal perspective, because entitlement spending is crowding out all the other things government should do.

Coming from two card-carrying members of the liberal intelligentsia, this is a welcome admission. However, when they get to the money paragraphs–namely, telling us what to do about this–they become timid, and suggest that the recent diminution of health care inflation may continue and maybe there’s more to be done there, and then mention some kinds of means testing.

Given that we’re not sure why health care inflation has slowed, I think it’s less than a safe bet to assume that the trend will continue, and pointing to the Affordable Care act as a source for further downward price pressures begs a detailed explanation as to what, precisely, those provisions are. Capping the deductibility of employer-provided health insurance would be a big force for good, but under current law it comes too late (2017) and affects too few people to make any difference.

Charging the wealthy more for Medicare (which they also mention) is undoubtedly going to be a part of any solution but the deficit is so deep and growing so rapidly that it can never be enough.

On the Social Security side–which they skipped over–a progressive indexation of initial benefits is definitely a part of any solution, but that would have to dip down and impact, to some degree, the top 50% or so of all new retirees to come close to getting the system in balance.  Having them point out that progressive indexation wouldn’t cut anyone’s benefit–it only slows the real growth of initial benefits for the wealthy–would have been a positive addition to the debate.

It’s heartening to have respected economists associated with the Democratic Party pointing out that the entitlement crisis is real; it would have helped a bit more if they could have made it clear that it can’t be fixed solely by wise bureaucrats or on the backs of the wealthy.