Arnold Kling  

Thoma Takes on Robert J. Samuelson

Physician Pay... Name Russ's Book!...

Mark Thoma writes,

[Columnist Robert J.] Samuelson's continual focus on the budget deficit obscures the real problem. It doesn't matter whether health care is in the public domain or the private domain, the costs will be daunting either way if they continue on their present trajectory, so finding ways to hold down health care costs is where the focus needs to be.

If Samuelson really wants to help, he can quit writing the same misleading and counterproductive column over and over again. Quit saying "cutting retirement benefits or raising taxes" are the "obvious choices" when it's not obvious at all. Cutting retirement benefits or raising taxes will do nothing to reign [sic] in health care costs so these measures do not address the main problem.

Thoma thinks that the core issue is rising health care spending. Samuelson thinks that the core issue is future obligations to retirees.

While Thoma's viewpoint is expressed with strong rhetoric, its substance is not so persuasive. Why is high spending on medical care a public policy problem at all? If the affluent were spending their own money to purchase health insurance or to pay for medical services out of pocket, I would see no need for government to "rein in" such spending.

The public policy problem arises because our government allocates health benefits based on age rather than based on need. The public policy challenge is that we have obligated too much in future benefits to retirees relative to our likely ability to collect taxes. In that regard, I think that Samuelson has correctly identified the core issue.

UPDATE: PGL writes

The point that both Mark and Dean were making was that we should separate the Social Security and health care discussions.

Both Social Security and Medicare rely on the same tax source for meeting obligations to future seniors. Because we allocate more payroll taxes to Social Security than to Medicare, it looks like Social Security will be nearly in balance in 2040, and Medicare won't. But if we allocated more payroll taxes to Medicare instead, it would be the other way around.

There is nothing wrong with taking a holistic look at the promises that we are making to seniors. If you think that you can pull a rabbit out of your hat and slow the rate of increase in health care spending, then that holistic outlook will improve. For that matter, there are other rabbits to pull out of a hat, such as high productivity growth.

But until we demonstrate that we can pull a rabbit out of our hat, coming up with a realistic combination of tax rates and promises to future beneficiaries seems like a prudent thing to do. Here are four options:

1. Reduce promises to future seniors, and only increase those promises if economic conditions warrant.

2. Maintain promises to future seniors, and tell everyone to expect much higher tax rates in the decades ahead.

3. Raise taxes now, to "save" for the future.

4. Blame the problem on rising health care costs.

I don't care for (3) very much. PGL's criticism of the 1983 "rescue" of Social Security is one that I would tend to apply generically to the approach embodied in (3). It's difficult to hold politicians to a promise to save now, rather than spend and/or cut taxes elsewhere.

I favor (1), of course. I could respect you in the morning if you picked (2). The case for (4) is the one that I thought Thoma was making, and I continue to find that evasive and unsatisfying.

Comments and Sharing

COMMENTS (13 to date)
dearieme writes:

What on earth is a "core issue", why is it singular, how - in general - might I identify one?

Matt writes:

Entitlements will be reduced for the simple reason we cannot afford them, so they do not worry me. If they are not reduced by the legislature, then they will be reduced by the underground economy.

pgl writes:

Arnold - my reasons for suggesting that this is a pointless misrepresentation of what Mark Thoma said are expressed over at Angrybear. Hopefully you did not carefully read and think about what Mark was saying. Otherwise, this was a very shameful post.

Tom writes:

Don't bother going to Thoma's site. They add nothing and the babbling will give you a headache.

R. Richard Schweitzer writes:

Didn't Friedman give us a clue to look not at tax levels, but at levels of borrowing?

dale coberly writes:


please see my comments on angry bear. it seems to me that you are sitting in the cave making shadow pictures with your hands and then running arount screaming and bumping into stalagmites because the pictures scare you.

put me down for option 2.

the problem you see, is that we (individuals if not as a government) will need to pay for the "problem" of longer life and higher cost health care. there ought to be plenty of money to do it with.

what you seem to propose is throwing up our hands and saying we can't "afford" a tax raise so people will somehow just magically have to pay for their retirements and health care some other way.

and i have to point out that when they pay for them through the government, they are paying for them themselves. my SS and Medicare will not cost you a dime. it will cost me maybe 20% of my working income. that's a reasonable cost.

brian writes:

[Comment deleted for supplying false email address.--Econlib Ed.]

pgl writes:

Your #4 is not what Mark was saying. He was not using the Samuelson narrow minded deficit measure for everything. But you accuse Mark of saying #4. Please re-read what he wrote more carefully.

Lord writes:

If it were a matter of the affluent spending their own money it would not be an issue, but it isn't. You may wish the government was not in healthcare but it is, and in a big way. If you wish a bipartisan solution, then you will have to face healthcare. If you do not, then the present bipartisan solution, do nothing, is the only viable one. I am patient. Do nothing works for me.

pgl writes:

There is a version of #1 that might get not only Bruce Bartlett but also this liberal to agree - at least in part. Reduce those promises to seniors made in the Prescription Drug Benefit. Heck, scrap the program until one is willing to tell voters they have to pay for this via your #2. But like I said over at Angrybear, I opposed the Prescription Drug Benefit sine a tax base because it was the usual money grows on trees garbage President Bush loves to talk about.

Lord writes:

You imply that means testing would solve this when that isn't case. It would be more honest if you just said why should we pay for it when we can let them die in the streets. I could respect you for your honesty if not your sentiment.

bee writes:

I think that it is important to clarify why we think we think we have a health care crisis. I think Arnold is correct in his line of questioning. The amount we spend on health care is not a suffcient measure to infer we have a problem. The amont consumers choose to spend (whether by choice or need) is not a material criteria. It is also inappropriate to use other nations as a basis for determining what the "right" level of spend should be for health care expenditures. The fact that some cannot afford or more specifcially many choose not to insure is yet another reason we cannot employ to infer we have a problem. Rising prices is certainly no reason to assert we have a problem, especically when we have no appreciation for why costs are climbing.

Net I fear that Mark often likes to invoke moral indignation in place of reason. While I respect his right as well as those at the Angry Bear to present their emotional appeals, I think we shoud recognize that they are merely seeking to impose their will and morality upon others. Given that we do not recide in a state where their will or those who think like them have the "right" to force their will upon others, I would ask the to apply more thought to their positions.

dale coberly writes:


you make the serious error of supposing that what you belive is "reason" and what other people believe is (in this case) "imposing morality."

there is no cure for this.

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