GOTTA PAY THE PIPER, IF YOU WANT TO DANCE:

Wealth Versus Health (Paul Krugman, 4/19/02, NY Times)

[L]ast week Thomas Scully defied a subpoena from the Small Business Committee.

Who? What? If you are an American over 65, or are considering becoming one, you should pay more attention. Mr. Scully, you see, is the director of Medicare and Medicaid. The specific issue on which he refused to testify--payments to providers of portable X-ray machines--sounds arcane. But the real story here is the collision between tax-cut myths and fiscal reality, with Medicare caught in the middle.

The background is the recent surge in health-care expenses. During the 1990's the rise of H.M.O.'s put a squeeze on medical bills; now there is nothing left to squeeze. So H.M.O.'s are sharply increasing their payments to health-care providers, and the federal programs overseen by Mr. Scully are under pressure to follow suit. Since these programs cost more than national defense, we're talking about a lot of money here.

Still, if medical care is a priority, which it surely is for the voters, why doesn't the government simply provide the necessary resources? You already know the answer: it's hard to reconcile realistic spending increases with plans for more tax cuts.

This being a Paul Krugman column it quickly descends into silly class warfare rhetoric, but the basic point remains germane : we have a choice between cutting our tax burden or paying for the health care of retirees. We can't do both and if we chose to do the latter, we're actually going to have to raise not lower the former.

Health care costs are going to keep going higher for one reason in particular, more and more voters are going to be seniors and they want you and me to pay for their health care, instead of paying for it themselves. And why not? If we had the political power we'd all make other people pay for our stuff. So with seniors wielding ever larger voting majorities the rest of us are pretty much screwed.

Now it's always interesting to me that people will complain about how bans on child pornography, military tribunals for terrorists, x-ray machines at airports, and cameras on stop lights represent giant steps towards a totalitarian state, but the prospect of a truly confiscatory tax regime doesn't apparently bother anyone other than conservative Republicans much. Maybe it is just too speculative at this point for most people to take it seriously. But by the time it becomes reality it will be too late to fix it. We're nearly at the end of our window of opportunity to deal with these entitlements problems.

The 1990s were the ideal time to act. Having just won the fifty year long Cold War, the U.S. enjoyed an enormous peace dividend and a unique opportunity to scale back the size of the Federal government, which had grown absurdly bloated as a series of presidents tried buying off voters with domestic spending in exchange for their approval of military spending. Instead, the disastrous decision of the elder George Bush to raise taxes rather than cut spending (understandable to a degree since he was confronted by a Democrat Congress) resulted in his ouster and left us with a president so wholly consumed by self-interest that he made no effort to reform entitlements and shrink government, until forced to by the Republican Congress that came to power in 1994. In fact, had Bill Clinton had his way in '93-94 we would be struggling under the weight of an even worse entitlement crisis, in the form of his Health Care Plan.

What makes the Clinton years such a tragic waste is that genuine entitlement reform would have been much easier for a Democrat than it will ever be for a Republican. In the same way that Richard Nixon received a free pass when he sought rapproachment with Red China, because he had already proven his anti-communist bona fides, Bill Clinton would have received some benefit of the doubt from the Left had he tried cutting wasteful government programs and putting Social Security and Medicare on sounder financial footing. No Republican can expect the same. For them awaits the kind of "robbing the poor" nonsense that Mr. Krugman regularly spews.

The candidacy of George W. Bush provided hope to those who take the looming fiscal crisis seriously. The rather meager first steps towards privatizing Social Security that he ran on at least offered a chance to set ourselves on the right path. But then Jim Jeffords swtched parties and the opportunity to begin reforming Social Security disappeared along with the Republican majority in the Senate.

With every passing year it becomes less and less likely that we will undertake the radical reforms that the system so desperately requires. What might have been possible while the Baby Boomers were still gainfully employed and paying taxes will become impossible as they retire and start living off the government teat. It surely doesn't improve the prospects for reform that influential columnists like Mr. Krugman are poised to holler about Republican mean-spiritedness towards the "poor"and favoritism towards the "wealthy" should they have the temerity to tackle the task.

Posted by Orrin Judd at April 19, 2002 2:56 PM