It's always necessary to do the math. By this I mean that journalists need to measure politicians' promises against underlying realities, as represented by numbers. But many reporters detest math. This math phobia partly explains why the media did such an abysmal job covering the debate over the Medicare drug benefit -- ignoring the program's long-term costs -- and why they're committing a similar blunder with President Bush's Social Security plan. They're missing the obvious: The plan doesn't address baby boomers' retirement costs.
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.
The public is understandably confused, and the media feed the confusion. Tackling Social Security's long-run sustainability sounds like dealing with the baby boom -- but it isn't. Generally, the media overlook the distinction. Most stories dwell on Social Security's politics and on the advantages and disadvantages of personal accounts. Journalists echo Democratic criticisms, but that's not balanced or clarifying, because the Democrats, like Bush, aren't acknowledging the unpopular choices posed by an aging baby boom generation. Reporters have to reach independent judgments, but this founders on math phobia.
The debate over the Medicare drug benefit in 2003 revealed the same failing. Bush's drug proposal had to cost a lot. In February 2003 the CBO estimated that all drug spending on people 65 and older would total $1.8 trillion from 2004 to 2013. Covering any significant share of that would raise Medicare spending sharply. Later, the CBO's director testified that the program's second decade would be much costlier than the first, because (among other reasons) more retirees would use it.
I wrote some columns reporting that the huge costs were probably underestimated. But the mainstream media mainly ignored the long-term costs. To confirm that, I reviewed stories in The Post and the New York Times, because these papers influence other media. Their emphasis was on (a) congressional politics, (b) whether Bush's benefit was too stingy and (c) whether the benefit would unduly enrich the drug companies (these last two themes reflected Democratic criticisms).
Call this journalistic malpractice. Recently both the Times and Post ran front-page stories reporting -- in tones of shock -- that the costs of the Medicare drug benefit were rising rapidly. The stories were misleading; all that had changed about the estimates is that two early years (with little spending) had been dropped and two later years (with lots of spending) had been added. If the media had reported accurately two years ago, there would be no shock today.
The malpractice continues. The disagreeable reality is that the baby boom's sheer weight will sooner or later force cuts in Social Security and Medicare. We ought to be debating them now and giving people warning. But almost everyone has a stake in denial, and the media are complicit. Personal accounts -- like them or not -- don't solve the real problem. If journalists were doing their jobs, everyone would know that.