Charles Blahous, one of the two public trustees for Social Security & Medicare, has graciously agreed to answer some questions about the recent Social Security and Medicare Trustees’ reports and the reform of these vital programs. Dr. Blahous is a research fellow at the Hoover Institution, and was the Deputy Director for the National Economic council from 2007-09, and served as a Special Assistant to the President for economic issues from 2001-07. He is the author of Social Security: The Unfinished Work (2010: Hoover Institution).
The interview will be divided into three days as follows:
- General/Overview, Tuesday May 17, 2011
- Social Security, Wednesday May 18, 2011
- Medicare, Thursday May 19, 2011
Below are the questions I submitted to Dr. Blahous, along with his answers.
- What is the job description of a public trustee for Medicare and Social Security?
Our job is basically to vouch for the financial projections for the Medicare and Social Security programs. The public trustee positions were created by the 1983 Social Security amendments, pursuant to furthering public confidence in the objectivity and integrity of the projections. There are two; one Republican (that’s me), and one Democrat (Robert Reischauer).
- Which is more urgent, Social Security reform, or Medicare reform? Why?
They’re both urgent. There’s no clear answer; you could argue it either way. If –and it’s a big “if” – the savings under the new health care law hold up forever, then Social Security faces the bigger long-term actuarial shortfall. And Social Security’s Disability Insurance Trust Fund would go under before any portion of Medicare would. So if you’re talking in terms of trust fund balances and the risk of benefit reductions, Social Security is the bigger problem. But that’s partially an artifact of the fact that some parts of Medicare – like Parts B and D – never go insolvent by definition. In terms of long-term cost growth and pressure on the unified federal budget, Medicare remains the bigger problem. Speaking very subjectively, I tend to think that Social Security would benefit the most from prompt action, because we still have the opportunity there to confine any benefit changes to purely prospective ones. With Medicare, we’re already in the soup of implementing changes that will have adverse spillover effects on beneficiaries. Our window of opportunity to avoid that in Social Security is closing fast, so we should seize it while we can.
- What is the value of long term projections like those made by CBO?
Well, as far as CBO is concerned, I’d say the value is qualitative; to show the broad parameters of where are heading under current law – specifically, unprecedented federal spending levels and structurally unsustainable finances. But that’s a qualitative image; CBO would not claim quantitative accuracy over the very long run. The same is true for the trustees and Medicare. We can present a long-term picture and show why it’s clearly unsustainable, but long-term health-care cost projections are inexact to say the least. Where long-term projections are most valuable are for something like Social Security where there is a strong philosophical relationship between workers’ near-term contributions and their long-term benefits, and where the pertinent variables can be projected with far greater accuracy. That’s why long-term Social Security projections have a pretty substantial history behind them, and a fairly impressive track record as well.
update: fixed a typo
More from Charles Blahous on Social Security tomorrow.