1 Big Chart: There Is No Social Security Crisis

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1 Big Chart: There Is No Social Security Crisis

Here's a question for the under-30 crowd: Do you think Social Security will still be around when you retire? Half of you don't. Here's why you should.

The below chart, courtesy of Peter Diamond and Peter Orszag, compares what we spend on Social Security and Medicare today (blue) as a percent of GDP versus what the CBO projects we will spend on them in 2050 (red). It's a tale of two very different entitlements.

What a difference 40 years makes. While Social Security and Medicare make up roughly equal portions of the budget today, the CBO expects Medicare spending to be exactly double Social Security spending by 2050. There is no "entitlements" crisis. There is a Social Security problem, and a Medicare crisis. And the Medicare crisis is really a general healthcare spending crisis -- indeed, Medicare actually spends less than private insurance does.

That doesn't mean that Social Security doesn't need to be tweaked. A bump from five to six percent of GDP, as the CBO projects, isn't trivial. But checks to retirees won't bankrupt us. Fee for service for those retirees might.

So why do politicians prefer to talk about fixing Social Security? It's precisely because it's so easy to fix. Social Security is an accounting problem. Money goes in. Money comes out. If you increase the income, or decrease the outlays, you're finished. The challenge is raising revenue or slowing benefit growth in a way that is savvy enough to pass Congress and fair enough to keep benefits for those who really need them.

But we're pretty much clueless when it comes to reining in health care spending. The Affordable Care Act (aka Obamacare) does contain a good number of ideas about how to "bend the curve" of healthcare spending down, but we can't say with much certainty how well they'...