PUTTING OUR HOUSE IN ORDER – A
Guide to Social Security & Health Care Reform, by George P. Shultz and John B. Shoven, W. W.
Norton, New York, London © 2008, ISBN:
978-0-393-06602-9, 226 pp, $24.95 , www.wwnorton.com/
Reviewed by Del Meyer, MD
Shultz and John Shoven open their Guide Book quoting Fed Chairman Ben Bernanke's
Senate testimony concerning the right time to address our entitlement programs,
"I think the right time to start is about ten years ago. The projected costs for
these programs - Social Security, Medicare, and Medicaid - loom with gathering
The unease is produced by a feeling that the costs of
entitlements are out of control and will overwhelm the budget. This will bring a
catastrophe for beneficiaries whose needs will not be served as well as for the
fiscal stability of the United States. But can the entitlement problems be solved?
Whether or not the political process can work out sensible changes is certainly an
open question but Shultz is confident that progress can be made by reaffirming the
wide consensus that the present programs are not sustainable and by showing that
there are workable alternatives.
The magnitude of these costs cannot be met by any
reasonable projection of future federal government revenues. Can the U.S. Body
politic somehow find a way to ensure that systems are in place to provide reasonable
income for the elderly that are consistent with fiscal sanity?
Dr. Shultz offers a different approach than the
impending catastrophe, which is prevalent in much of the current writing on this
subject. He cites informed sources about careful projections of future costs made by
the Congressional Budget Office (CBO) which show that entitlement costs alone could
reach 28.5 percent of gross domestic product by 2050, clearly an unmanageable level,
especially considering that federal revenues have never exceeded 21 percent of GDP in
the history of the Republic. And these projections reveal only part of the problems
before us. Commitments by state and city governments and by private employers
contribute substantially to the looming threat which Shultz calls, "The Iceberg
Shultz is optimistic of a positive approach. He
relies on America's solid record of economic achievements, which holds promise of
continued success in the future. He points out American success on many fronts. The
U.S. economy sets the world standard, and its growth is an essential ingredient in
the expanding global economy. The creativity and dynamism of the American economy now
yield strong gains in productivity (output per man-hour) that surpass the rate of
improvement in many prior decades. The U. S. economy produces one of the highest per
capita incomes in the world and no other major developed country has been able to
keep pace, let alone catch up. So it's clear: We have success on our hands.
The economy is by no means the only area of success.
Not only do Americans live longer than ever before, but many are healthier and
capable of being productive far longer than at any time in the past. These trends are
likely to continue as a result of many breathtaking advances in science and
technology. He feels such momentous developments are opportunities to nourish.
The contradiction between this clear evidence of
success and the current atmosphere of unease in the United States calls for a change
in mind-set. The projected gargantuan shortfalls in the U.S. budget stem largely from
the interaction of constantly expanding costs of health care and longer life spans
with relatively inflexible entitlement programs. Increasing longevity and better
health are developments to celebrate. The challenge is to adapt income support and
health care programs to these changing demographics and health care options.
He feels the difficult problems in financing Social
Security and health care commitments must be approached from a realistic perspective
based on demography, medical developments, and fundamental economics. In demographic
terms, we are retiring earlier and living longer. The result is a growing proportion
of people outside the labor force compared with those who are working. Medical
treatment options too have expanded. As a consequence, the federal government has
increasingly become a mechanism for transferring every-mounting sums of money from
younger workers to older retired Americans.
The history of Social Security and health care
programs in the United States shows that their structural roots come from an
altogether different era, that of the Great Depression and World War II and its
aftermath. These programs must be adjusted to better accommodate increased longevity
as well as improved and promising medical treatments, which are often costly.
Reform of these programs will not come easily. To
touch them, many politicians worry, is to touch a third rail. But well-documented
projections of the costs of current programs show that inaction is simply not an
option. Everything about the U.S. economy is dynamic except its major entitlement
programs. Shultz presents how these programs must be modernized so that they are
suitable for the twenty-first century and meet the tests of fairness and fiscal