Fiscal Responsibility

What’s wrong with the story of entitlements wrecking the economy? Plenty.

For starters, the $56 trillion “unfounded liability” figure relies on creative accounting. Only about $6.6 trillion is the actual public debt, according to the U.S. Treasury. Pete Peterson , summit participant, and his foundation, launched a $1 million ad campaign, irresponsibly spreading false information about the nation’s budget. Most of the number Peterson cites is a combination of the 75year worst case projections for Social Security, Medicare and Medicaid.

These three programs face very different challenges and remedies. The Congressional Budget Office puts the Social Security 75 year shortfall at only about one-third of 1 percent of projected gross domestic product.

Social Security is financed by taxes on wages and since the mid 1970s wage growth has stagnated. Medicare really does face big deficits because Medicare is part of an inefficient, fragmented health insurance system. It makes no sense to “reform” Medicare in isolation.

No doubt President Oboma hopes that he can bring Peterson and others like him on board for universal coverage while promising to stem the growth in health care costs, and there may be a political basis for that agreement.

The more troubling question is whether he will capitulate to demands for cutbacks in Social Security as part of a fiscal grand bargain.

Source: Our Future Today, February 23, 2009