Pete Davis reports on a lunch talk by former OMB Director Alice Rivlin (she was CBO Director, too, the Peter Orszag of her day) about the economic situation:
Her most striking remarks were how forcefully she warned that we should undertake long-term deficit reduction measures now. Without them we will face rising interest rates before the economy has enough time to recover as foreign purchasers of U.S. Treasury debt balk at buying a lot more of it. She boldly asserted “Now is an excellent time to fix Social Security and Medicare.” She referred to how we fixed Social Security in 1983 as a model: extend the retirement age and index lower benefit growth for those under age 50 and raise the tax rate. She added that we could save a lot of Medicare spending before we tackle health care reform by requiring competitive bidding on durable medical equipment and by allowing the Centers for Medicare & Medicaid Services to negotiate lower pharmaceutical prices.
Very little about the conservative movement’s reaction to President Obama’s efforts to broker a compromise on the stimulus package makes me think that this would be a good time for bipartisan consensus-building on Social Security. What’s more, I’ve never understood the fetishization of the idea that Social Security’s possibly looming shortfall needs to be addressed in advance. The essence of the much-praised Greenspan Commission effort was that they genuinely swooped in at 11:58 PM. And substantively I’m not sure I see why it’s better to act sooner. I understand the impulse to say that the giant short-term deficit we’re about to have needs to be matched by some confidence-building measures to get long-term gaps under control. But surely everyone understands the principles by which the Social Security deficit could be resolved—it’s a question of mixing tax hikes with benefit cuts with the proportion determined by the relative strength of the parties at the moment of truth.
The action, as ever, is all with Medicare. Not only is this problem financially bigger, but it’s conceptually bigger. Everyone understands more-or-less what a Social Security compromise would look like. Medicare’s a whole other ballgame.