I'm all in favor of this, and it at least stops us from digging the hole deeper. But at some point we've got to actually start fixing the problem: With the budget deficit soaring toward a record $1.8 trillion, the Obama administration is planning to propose tough new rules that would require lawmakers to pay for new initiatives -- including an overhaul of the health system -- or face automatic spending cuts. …If approved by Congress, the rules would forbid lawmakers from expanding entitlement programs such as Medicare and Social Security, creating new entitlement programs or cutting taxes unless the cost is covered by spending cuts or tax increases. If lawmakers fail to pay for their initiatives, Obama's rules would subject entitlement programs to automatic cuts, said sources who spoke on condition of anonymity because the plan has yet to be announced.
Tuesday, June 9, 2009
Obama proposes closing barn door…
Monday, June 8, 2009
NASI Conference: The Quest for Adequate Retirement Income
The National Academy of Social Insurance will hold a conference, The Quest for Adequate Retirement Income, on June 17, 2009 from 3:00pm – 5:00pm at the National Press Club, Washington, DC. Opening Remarks Janice Gregory, Consultant and President-Elect of NASI Developments in Retirement Income Adequacy Alicia Munnell, Center for Retirement Research How are 21st century seniors faring in retirement? What are reasonable goals for wage-replacement? To what extent are retirees achieving those goals? What is the trajectory for Social Security and retirement income adequacy in coming years? What are the implications of recent developments in pensions, savings, 401(k)s, home values, and jobs for the retirement security of boomers and those who follow them? What Does It Take to Make Ends Meet? Joan Kuriansky and Shawn McMahon, Wider Opportunities for Women What insights can be drawn from new research on measuring economic security for seniors? How does current research help policy makers set retirement income goals? What insights can we draw from new work on an Elder Economic Security Standard in the United States, efforts to update the official poverty thresholds, and international measures of income adequacy (or inadequacy) for families and seniors? Adequacy for Low-Income Groups as Part of Social Security Solvency Kilolo Kijakazi, Ford Foundation Which groups are most at risk of having inadequate incomes in old age? Which groups are most reliant on Social Security? Why is it important to address the adequacy of Social Security benefits for low-income workers, families, and elders as part of achieving long-term solvency in Social Security? Commentary Jason Furman, National Economic Policy Council, Office of the President Observations on the quest for adequate retirement income in today's policy environment.
China looking to hedge its dollar risk?
With record federal deficits and debt-to-GDP ratios rising, Chinese government officials – who hold around a tenth of the total U.S. public debt – are apparently getting concerned that a dollar decline could leave them holding the bag. The U.K. Telegraph reports that the director of China's number two bank said the U.S. government should start issuing bonds denominated in Chinese yuan. Unlike dollar denominated debt, debt issued in the currencies of former countries would face less risk in the case of dollar devaluation or inflation. Of course, the threat of outright default, or of assistance from the IMF, would increase. With debt-to-GDP ratios projected to rise to 85 percent and higher, it's becoming clearer that our foreign lenders are getting concerned about the U.S. fiscal gap, even if Congress and the administration seem somewhat less bothered.
Friday, June 5, 2009
We know how to fix Social Security. We don’t know how to fix Medicare. So why not fix Social Security?
A story on NPR – titled "Fixing Social Security: A Solvable Problem" – raises a common but logically suspect argument: that health care, being the largest problem, is the one we should focus on: Obama said fixing Social Security is actually one of his smaller challenges. "There are some problems that are really hard to solve," he said. "This is one we actually can solve." Here's the question: why does this justify ignoring Social Security in favor of health care reform? After all, as the administration's own health care plans show, we really don't know how to cut health care costs without impacting quality, much as we'd like to do so. Enacting reforms when we don't fully understand the problem obviously carries some risks. Social Security reform, as Obama stated, is far more straightforward; all that's really needed is political leadership. It would seem that's something the President could provide in order to get this very large problem out of the way.
Thursday, June 4, 2009
Shooting the Messenger: CBO in the Crosshairs
Over at AEI's blog, I talk about a new theme in the healthcare debate: criticizing the Congressional Budget Office for not crediting the Obama administration's proposed reforms with significant health care savings. I argue that CBO's skepticism of the cost-saving potential of reforms such as comparative effectiveness research, disease management and healthcare information technology is probably well-founded and their focus on getting the incentives right makes sense. Instead of bashing the CBO, health reformers on the left should think harder about setting up incentives so that the reforms mentioned above would actually save significant money.
Wednesday, June 3, 2009
The Social Security Statement: New and Improved
The Social Security Administration has made some improvements to the Social Security Statement, the annual benefit estimate sent to every worker each year. The first change is a mention on page 1 of SSA's new When to Start Receiving Benefits pamphlet, which I think is a much improved explanation of the pros and cons of delaying benefit claiming. In the past I'd thought there was a bias in SSA's procedures toward encouraging people to claim at 62. The new material is much more balanced and I think very informative. Second, in a bit of behavioral economics at work, the benefit estimates on page 2 now begin with benefits as of the Full Retirement Age rather than age 62, the age of earliest eligibility. People often gravitate toward the first thing they read, so it makes sense to make that the Full Retirement Age rather than earliest one, at which benefits can be cut by 25 percent for life. Click here to see a sample statement. Congrats to all at SSA who worked on this – a job well done.
Monday, June 1, 2009
“Assume a can opener…”
You've heard the joke: A physicist, a chemist and an economist are stranded on an island, with nothing to eat. A can of soup washes ashore. The physicist says, "Let's smash the can open with a rock." The chemist says, "Let's build a fire and heat the can first." The economist says, "Let's assume that we have a can-opener..." I thought of this admittedly lame joke when I read Peter Orszag's post at the OMB blog discussing the Obama administration's health care reform plans, in which Orszag effectively assumes massive reductions in health care costs without specifying any plausible route by which these reductions would take place. As Orszag points out, there are two elements to Obama's health care plan: first, expansion of health coverage to reduce the number of uninsured; and second, measures to reduce the long-term growth rate of health costs, which threaten the budget and the economy. Orszag also accurately points out that coverage expansion would increase costs immediately while savings from reducing health care cost growth would materialize only over time. So far, so good. But here's the problem: nothing the Obama administration has proposed would come anywhere close to producing even the most modest cost savings discussed by Orszag. The Obama administration puts forward three principal health care reforms: information technology, particularly in the form of electronic medical records; disease management, which includes intensive follow-up of chronic diseases such as diabetes; and cost-benefit analysis to find the best treatments for the dollar. But as the CBO has repeatedly pointed out – see CBO director Doug Elmendorf's March congressional testimony for a summary – these reforms, while potentially improving health care treatment, are unlikely to do much to reduce costs and could potentially even increase costs. The key, Elmendorf stresses, is to get incentives right (the word "incentives" occurs 37 times in a relatively short document). The Obama administration is taking an "if you build it, they will come" approach, assuming that the simple presence of these reforms will cause health care participants to act on them. CBO's point, and that of many others, is that participants currently lack much incentive at all to focus on savings, so these reform won't affect their actions very much. These costs savings are what Orszag in his Social Security days called a "magic asterisk," money that materializes out of nowhere. Policymakers should be wary of "reforms" that offer spending increases in the here and now followed by cost reductions out in the mist.
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