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Re: Our Rocket Slide to Fiscal Hell



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Am I being unfair to George Bush?  Ramesh thinks so.

Um, Jerry, remember 2005?

Oddly enough, I do.

President Bush did use political capital to try to reduce Social Security’s unfunded liabilities. That doesn’t excuse the way Medicare was expanded, but it ought to go on the credit side of the ledger.

Yes, give credit where credit is due. George Bush did indeed try to reduce some of the damage (albeit not very competently). Alas, the GOP Congress would have none of it. 

That said, it’s unclear exactly how much of this coming train wreck might have been averted had Bush succeeded. His campaign for reform, after all, was strangled in its congressional bed long before a “Bush Bill” could emerge for scoring. 

But we do have some numbers to chew on. Back in 2005, the Social Security Board of Trustees Report calculated that the Ryan/Sununu reform bill (the bill that — if memory serves — seemed to have the most political traction at that time, relatively speaking) would have reduced net cash outflows from the Treasury from $12.8 trillion (no reform) to $9.1 trillion. The DeMint bill would have reduced net cash outflows to $8 trillion. The Johnson/Flake bill (the bill championed by my colleague Mike Tanner) would have reduced net cash outflows to $6.5 trillion. The most ambitious bill out there — that sponsored by Kolbe/Boyd — would have reduced net cash outflows to $2.4 trillion.

Let’s hypothesize a successful reform campaign. No matter which bill we hypothesize into law, the costs of the Medicare prescription drug plan that George Bush eagerly signed into law ($15.5 trillion) is almost certainly greater than the savings that might have accrued from Social Security reform ($3.7 trillion – $10.4 trillion).

Hence, one might argue that had President Bush had his way, the coming fiscal train wreck would only have been a lot worse rather than a lot, lot worse as a consequence of his presidency. One might also argue that, had the president ignored Newt Gingrich’s cheerleading for the Medicare prescription drug bill and actually vetoed the thing, failure to reform social security would have kept the Clinton status quo . . . which was substantially better than what we got (that is, unless the prescription drug plan really does end up eroding the political foundations of Medicare and leading, in turn, to a massive collapse of socialized medicine . . . the future as foretold by Newt Gingrich back-in-the-day to corral conservative votes for the plan).

We could also look at this another way. The federal reports released this week indicate that the unfunded liabilities associated with Social Security are about the same size as the unfunded liabilities associated with the Medicare prescription drug plan. So for the cost of the drug plan, we could have funded Social Security forever without cutting benefits or raising taxes. 



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