Treasury Secretary Tim Geithner’s entitlements report was touted as a victory, despite a fast-approaching Social Security and Disability Insurance shortfall.It was described as a victory because it pushed back the Medicare shortfall a solid 12 years until 2029.
But both good and bad news rely on some very optimistic assumptions.
First, Geithner is assuming health care reform will bring down entitlement costs. He has to support this fundamental platform of the White House, because that’s what the White House has been saying healthcare reform will do. But this assumption has been challenged by many, including CBO director Doug Elmendorf. In fact, Geithner acknowledges his optimistic take on health care (via Heritage):
“[Much of Medicare’s projected improvement] is premised on the assumption that productivity growth in the health care sector can match that in the economy overall, rather than lag behind as has been the case in the past. This report notes that achieving this objective for long periods of time may prove difficult.“
Second, you’ve got to look at the improved Medicare numbers alongside the worse-than-ever national debt projections. This gets at Elmendorf’s claim that health care reform will shift costs to non-health spending.
Third, Geithner assumes strong and steady GDP growth. The report doesn’t give his assumed rate, but we assume it’s the ridiculous near-6% rate he used in June’s debt report.
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