Apocalypse Denier

There is no entitlements crisis, writes Salon.com contributor Michael Lind in "Let's cut Social Security to pay for banker bailouts!" It's a scare ginned up by an "anti-Social Security lobby" consisting of "libertarian zealots, Jeffersonian conservatives, center-right Democrats and bankers and brokers who would like to earn fees or commissions from the diversion of Social Security payroll taxes into IRAs."

Lind concedes that health care costs are a legitimate problem, but he manages to sweep that issue under the rug by focusing on the supposed non-problem of Social Security. One point in particular struck me because it had the veneer of plausibility:

The anti-Social Security lobby always presents the "unfunded liabilities" of "entitlements" in scary dollar terms, rather than as percentage points of GDP. Here's why: Over the next 75 years, the Social Security shortfall at most hovers around 1 percent of total U.S. GDP over that same period. Yes, that's right -- around a whopping 1 percent of U.S. GDP. And that is only in the unlikely event that some combination of growth, taxes and benefit cuts do not eliminate the shortfall in the future.

Fair enough. Let's take a closer look at the numbers. The chart below shows total projected entitlement deficits as a percentage of the Gross Domestic Product (GDP). I can assure readers that this does not come from libertarian zealots or anyone of that stripe. I took it from the just published "Summary of the 2009 Annual Reports" of the Social Security and Medicare boards of trustees. It was published under the names of four people, including three Obama appointees -- Treasury Secretary Timothy Geithner, Labor Secretary Hilda Solis, and Health and Human Services Secretary Kathleen Sebelius. Presumably, they are not party to any anti-Social Security cabal.

The blue on the bars represents revenue shortfalls for the Old-Age and Disability and Survivors Insurance (OASDI) trust fund, better known as the Social Security trust fund. Just as Lind says, the deficit never exceeds one percent of the GDP through the year 2083.

Of course, Social Security represents the most actuarially sound part of America's retirement safety net. It's the smallest part of the entitlement crisis. The red in the chart represents the projected revenue shortfall for Medicare Part A, also called HI, which covers payments to hospitals. The deficit in that program is growing rapidly, and will account for nearly 4% of the economy by 2083. That's the funding shortfall, mind you, not the total cost of the program. By way of comparison, the entire U.S. budget deficit in 2004, the bottom of the last business cycle, was 3.53% of GDP.

The green in the chart depicts SMI, or Medicare Parts B and D, which pay for physicians and drugs. Those don't have a trust fund. They generate some revenue from enrollees, but the bulk is paid out of the U.S. general fund. That deficit is roughly equal to the other two programs combined.

But that's not the end of the story. This chart doesn't touch upon the ramped up Medicaid expenditures we can expect over the next half century, nor the interest payments on our bloated national debt.

By focusing on Social Security, Lind misses the forest for the tree. Entitlement spending in all its forms and guises, not just Social Security, is unsustainable. Boomergeddon, the age wave apocalypse, is coming.