Cities without landmarks
Niagara Falls, U.S./Canada
One benefit of the prolonged campaign for the Republican presidential nomination has been the revelation that most of the 20 or 30 percent of Americans who describe themselves as conservatives live in a fantasy world. In their imaginations, Barack Obama, a centrist Democrat with roots in Eisenhower Republicanism rather than Rooseveltian liberalism, is a radical figure trying to take America down the path of “European socialism.” The signature healthcare reform of Obama and the Democratic Congress, modeled on Mitt Romney’s insurance-friendly Massachusetts healthcare program and closely resembling a proposal by the right-wing Heritage Foundation, is described as “statist,” “socialist” or “fascist” (as though Hitler came to power with the goal of providing subsidies to private health insurance companies).
How can otherwise sane people believe such lunacy? The answer is that members of the right-wing counterculture are brainwashed — that is the only appropriate term — by the apocalyptic propaganda ground out constantly by the conservative media establishment. A perfect example is a recent essay by Philip Klein, a senior editorial writer of the Washington Examiner, the right-wing newspaper owned by the billionaire Philip Anshutz: “The Welfare State Is Destroying America.”
Klein begins, typically, with the fall from grace of America under the sinister Franklin Roosevelt, who presided over the establishment of Social Security: “But Roosevelt was dead wrong that the program would help the nation avoid deep debt. Social Security and the entitlement programs that followed its legacy of seeking to protect citizens from the ‘hazards and vicissitudes of life,’ turned out to be fiscal disasters.”
In the real world, of course, today’s national debt has nothing to do with Social Security, whose trust fund has a surplus that will last for decades, with the precise date of the trust fund’s exhaustion depending on the rate of general economic growth. True, the federal government has to raise the tax revenue to repay the money it borrowed from the trust fund — but then, the federal government has to repay all of its creditors, domestic and foreign. What’s wrong with that?
As if to concede that there is no Social Security crisis in the near future, Klein engages in three intellectually dishonest maneuvers typical of right-wing propagandists. First, he talks about medium-term and long-term problems as though they were present-day emergencies. Second, he blurs the distinction between Social Security’s long-term fiscal challenges, which are minor, and those caused by rising healthcare costs, in order to make Social Security seem worse off than it is in reality. Third, he implies that “the growing debt burden” of the United States is primarily caused by Social Security, Medicare and Medicaid, ignoring tax cuts, wars and the effects of a near-depression:
With health care costs rising and the population aging, America’s welfare-state obligations are bringing the country to its financial knees. If left unchecked, the growing debt burden will not only trigger runaway inflation and stifling taxes, but it will also threaten national security.
By now readers of the Washington Examiner must assume that Franklin Roosevelt and Lyndon Johnson deliberately designed Social Security, Medicare and Medicaid to be paid for by federal borrowing. Why shouldn’t Klein’s audience leap to that false conclusion? After all, Klein has not mentioned the funding streams that pay for these programs: payroll taxes (Social Security), payroll taxes and general revenues (Medicare) and general revenues (Medicaid).
If Klein were honest with his readers, he would point out that the main causes of federal deficits in the last generation have been the Reagan and Bush tax cuts, plus the fiscal aftereffects of the Great Recession, in the form of falling tax revenues and increased spending on unemployment insurance and stimulus programs. But that would distract from the false impression that Klein is seeking to convey.
So far in this classic of polemical literature, “The Welfare State Is Destroying America,” Philip Klein has relied solely on rhetoric. In the next few paragraphs he uses a few numbers, all of which have been cherry-picked to paint a picture of imminent national economic collapse, and all of which are misleading.
Here is misleading argument No. 1:
Spending on Social Security, Medicare, Medicaid and Obamacare alone currently account for 46 percent — or nearly half of — federal spending, excluding interest payments. Over the next 25 years, that percentage will explode to 66 percent, or close to two-thirds, according to the Congressional Budget Office.
Ooh, scary! These numbers may frighten readers, but they are meaningless. The only number that conceivably would matter would be the overall federal-state-local spending as a share of GDP, which in the U.S. is well below the average for industrial democracies that are just as competitive and prosperous. Saying that the share of federal spending that is devoted to Social Security and healthcare spending will grow over 25 years from 46 to 66 percent does not support Klein’s case that the welfare state will “destroy” America. These are just irrelevant numbers, thrown out to impress the ignorant reader of the Washington Examiner.
Misleading argument No. 2 follows:
Numbers associated with the nation’s debt crisis are almost too staggering to comprehend. Last month, total U.S. debt surpassed $15 trillion. But a recent analysis by Boston University economics professor Laurence Kotlikoff found that when long-term entitlement obligations are considered, the true fiscal gap is $211 trillion.
What Klein fails to point out is that Kotlikoff’s calculation for unfunded entitlement obligations is for the period between now and infinity. Even if Kotlikoff and Klein used the briefer time span of, say, 2012-2100, there would be no cause for alarm, because nobody is going to present the federal government with a check for advance payment of all projected entitlement payments in the remainder of the 21st century, due tomorrow. In other words, saying the U.S. has a “fiscal gap” is like saying that you are in danger of bankruptcy from a “personal fiscal gap,” because you could not pay off the entire house or car mortgage today. As long as you can make the installment payments at a reasonable interest rate, you, like the nation, are fine.
The abstract “fiscal gap” arises almost entirely from the minor projected shortfall of payroll tax funding for Social Security and, more important, from the estimated out-of-control growth of healthcare costs in decades to come. Change the variables, by means of new taxes for Social Security, benefit cuts or control of excessive costs in the U.S. medical industry, and the Big Scary Fiscal Gap disappears or shrinks dramatically, depriving right-wing hacks and left-wing deficit hawks of a club used to beat Social Security and Medicare.
Does Klein tell his readers this? Of course not. He’s just throwing out scary-sounding statistics to stampede the yahoos.
On to misleading argument No. 3:
Greece, with an economy 1/50th the size of the U.S., is threatening the economic standing of the rest of Europe because of its growing debt burden, which hit 143 percent of its gross domestic product in 2010.
The U.S. is on pace to match that dubious distinction in under 20 years, according to the CBO, and to soar to 716 percent by 2080. Sustaining such debt would require raising marginal tax rates to as high as 88 percent, the CBO has told The Washington Examiner.
Shame on the CBO for misleading the public in this way. The experts of the CBO know perfectly well that the United States is never going to have a national debt of 716 percent of GDP or marginal tax rates of 88 percent. Long before anything like these absurd numbers were reached, policies would be changed to cut costs in medical spending. Long-term projections like these are just scary stories told to frighten the public into fiscal sobriety, in the same spirit that a parent would tell an overweight child that if she or he kept eating, then according to a straight-line computer projection, by the age of 40 she or he would weigh 23 tons.
As it happens, the CBO’s own rigorous work undercuts the apocalyptic narrative set forth by conservatives like Philip Klein. Here, from a CBO report of a few years back (the long-term projections have not significantly changed), is Box 2, “The Effect of the Aging of the Population on Spending on Medicare and Medicaid.”
This one graph disproves practically everything American conservatives say about the alleged unaffordability of entitlements. Note that the aging of the American population alone would only raise the share of GDP spent on Medicare and Medicaid slightly between now and 2082. The projected increase is almost entirely the result of excess cost growth in America’s dysfunctional medical-industrial sector and has next to nothing to do with aging. Now look at Figure 4, “Projected Spending on Health Care as a Percentage of Gross Domestic Product.”
Observe that the cancerous growth of healthcare costs occurs chiefly in private sector healthcare spending — not in Medicare and Medicaid. In other words, the cost problem is one of the entire U.S. medical industry, private and public alike. It is not a problem caused by “entitlements.”
Debating the solutions would take us too far from the subject, although it should be noted that most other countries control healthcare costs by means of “all-payer regulation” — that is, government-imposed price controls — not by means of market competition, the right’s unrealistic panacea, which no other nation uses, for the reason that simple market economics does not work in the healthcare sector. For the purposes of this discussion, it is sufficient to reproduce a final chart from the CBO report, Figure 5, “Federal Spending for Medicare and Medicaid as a Percentage of Gross Domestic Product Under Different Assumptions About Excess Cost Growth.”
Note that if the excess cost growth problem is solved, then the nightmare scenario never materializes, either in the near future or the distant future. Indeed, in the last few years, partly because of the loss of employer-based healthcare by the unemployed, and partly because of reforms in medical provision, healthcare cost growth in the U.S. has slowed. If that trend continues, then conservatives will no longer be able to claim that healthcare in general (not just Medicare and Medicaid) will eat up half the economy in 2082. The right will have to use other arguments to discredit Social Security and Medicare, like the hoary old claim that these programs are fascist or communist — an argument that has never persuaded the growing number of American voters who depend on Social Security and Medicare for their retirements and for protecting their physical health.
Philip Klein concludes his Op-Ed about how the welfare state is destroying America with further nonsense (you can’t claim he isn’t consistent). Reciting yet another right-wing myth, Klein asserts that because of Social Security and Medicare, the bond markets in general and the Chinese government in particular will stop lending America money and interest rates will skyrocket, destroying the American economy, yadda yadda yadda:
Just this past August, Standard and Poor’s downgraded U.S. debt for the first time in American history. Once bond holders abandon America, the nation will either have to dramatically cut spending, raise taxes steeply, or print money to buy up the debt — which would trigger massive inflation.
Where has he been since last August? Even a senior editorial writer at the Washington Examiner should be aware that the downgrading of America’s credit rating was followed by a rush of money into American bonds, not out of them, in defiance of the predictions of the deficit hawks. Evidently the bond markets think America is the world’s safe haven and are not terribly worried about long-term American entitlement costs.
The growing debt burden is also a national security risk, because it reduces America’s leverage against nations such as China, which owns a substantial amount of U.S. debt. And the fiscal crunch will force devastating cuts to our military — far beyond anything contemplated today.
Somebody should tell Klein that China’s export-oriented growth model depends on keeping its currency undervalued and accumulating dollars, which it then uses to buy dollar-denominated debt like U.S. Treasury bonds. If China revalued its currency, it would stop buying bonds to the detriment of its industries and to the benefit of many American exporters. If this were to happen, the U.S. deficit would shrink and we would need less external financing. Hurrah! In the long run there doubtless will be increases in U.S. interest rates, but they are unlikely to come about for the reasons that Klein and other apocalyptics on the right predict.
As for the Pentagon, the chief threat to the future of the U.S. military is neither the American welfare state nor the Chinese financial authorities, but the conservative wing of the Republican Party, which prefers round after round of tax cuts for the rich to the taxes that would permit the U.S. to fund both an adequate military and an affordable welfare state.
Klein concludes inescapably:
Thus, the conclusion is inescapable that, if America doesn’t end the welfare state as we have known it since 1935, it will end America as we know it today.
It may seem cruel to pick on Philip Klein, who is, after all, simply one of many minor hacks in the right-wing media machine controlled by billionaires like Anshutz and the Koch brothers. But it is worth reading the right’s propaganda now and then, just to find out how it is that so many of our conservative fellow citizens can have been so deceived.
Michael Lind is the author of Land of Promise: An Economic History of the United States and co-founder of the New America Foundation.More Michael Lind.
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