Bush Bilks the Elderly.

Once you wade through President Bush's rhetoric about "renewing the promise made to our seniors" and "enabling individuals to build financial wealth and security," you get to the radical core of his budget proposal. After his enormous tax cut for the wealthy, the next item on Bush's agenda is the destruction of federal pension and health insurance programs for the elderly. Simply put, he wants to destroy Medicare and slash Social Security benefits. His proposal reduces tax payments for both programs by throwing beneficiaries on the tender mercies of the private market.

But, of course, the President doesn't state it so bluntly. Unlike some of his more bombastic Republican colleagues, Bush acknowledges that Medicare recipients sorely need prescription drug coverage. In his budget proposal, he touts the Immediate Helping Hand program, which gives money to the states for temporary prescription drug coverage "for those beneficiaries who need it most." Only the poorest of the poor will receive full coverage: individuals with incomes at or below $11,600 a year, and married couples with incomes at or lower than $15,700. The proposal offers to cover half the drug costs of people who make as much as $15,000 a year and couples with incomes of $20,300.

So far, there's nothing objectionable in this modest program. The trade-off comes later. Bush's long-term plan is to privatize Medicare insurance, doing away with guaranteed benefits for the elderly and the disabled. He has embraced the Frist-Breaux Medicare bill, which would institute a system in which private insurance companies compete for healthy (and more profitable) clients, and cut out those who are more expensive to insure. This system would likely leave the worst insurance policies for those who need health coverage the most.

Bush and other proponents of Medicare privatization use the argument that the system faces financial trouble and is in dire need of "reform" to remain solvent in the future. In fact, Medicare is solvent for the next twenty-five years. Meanwhile, Bush's "cure" for Medicare is far worse than the disease. Medicare has a much better record at containing costs than do the HMOs Bush wants to bring in as agents of "reform." Recent experiments that allowed HMOs to take on Medicare clients led to increased costs. The results were not that surprising, given that the United States health care system spends about twice as much per person as the health care systems in the rest of the industrialized world. Thanks to an inefficient private bureaucracy that puts profits ahead of meeting people's needs, Americans grossly overpay for private health care, if they are lucky enough to have it. The private market still hasn't managed to do anything about the forty-three million uninsured. Instead of addressing this crisis, Bush's budget proposal would undo the one working health insurance program for the least insurable population of Americans.

Robert Naiman of the Center for Economic and Policy Research, a Washington, D.C., think tank, points out that a program of universal health insurance would cost a little less than Bush's massive tax-cut proposal. Statistics from the Health Care Financing Administration show that per capita health care spending in the United States is about $4,000 a year. "With about forty million uninsured, it can't cost much more than $160 billion for the government to pick up the tab," Naiman writes. "Now multiply that $160 billion times ten years, and you have the cost in terms of government revenue of the Bush tax cut." That $160 billion is actually an overestimate, since a government-administered program would get rid of about half the wasteful costs of the current private system. Just by using its purchasing power to bargain down drug prices, the government could save a bundle, Naiman points out: "Then we could have our health care and a tax cut, too."

The situation with Social Security is similar. Instead of shoring up Social Security by putting money into the system, Bush's proposal to "save" Social Security actually takes about $1 trillion out. That translates into a huge cut in benefits--and a big windfall for the mutual fund industry. The President's budget proposal suggests that individual retirees can make up the difference by playing the stock market. But that hope is based on unrealistic and internally contradictory economic forecasts.

The Social Security trustees have been projecting a shortfall in revenues every year since the beginning of the Clinton Administration. But every year, they keep pushing back the date at which that shortfall is expected. Right now, the predicted shortfall won't arrive until 2037. Recently, the trustees were forced to admit that economic growth has largely undermined the argument that the Social Security system is in "crisis." Nonetheless, proponents of privatization continue to argue that a crisis is brewing and that privatizing the federal pension program is the only solution.

Economist Dean Baker has repeatedly pointed out that the projected "crisis" is based on the Social Security trustees' extremely pessimistic forecasts of economic growth (about 1.7 percent over the next seventy-five years). At the same time, the assertion that individual stock market accounts will make up for taking money out of the system is based on hugely optimistic projections of growth (that the recent growth rate of 3.2 percent will remain unchanged). Both scenarios cannot possibly be true at the same time. If the economy is really going into the tank, causing a Social Security crisis, then the stock market would be going down. Stock prices are currently at an all-time high relative to earnings--a fact the Bush budget plan conveniently ignores. "In a situation where the price-to-earnings ratio for stock is close to double its historic average, the return to holding a share of stock will be close to half its historic average," the Center for Economic and policy Research asserts in a recent study.

During the Presidential campaign, the Century Foundation issued its own report that attempted to assess the impact of Bush's Social Security plan on retirees. It found that Bush's plan would mean cuts of about 41 percent, on average, in Social Security benefits. Money diverted from Social Security and invested in personal retirement accounts could replace about half of the shortfall. So a combination of reduced benefits and stock market earnings would add up to about 20 percent less than what Social Security currently provides to retirees.

That's actually an optimistic forecast, according to the Center for Economic and Policy Research. The center points out that the Century study assumed that the government would administer personal retirement accounts at low or no administrative cost and with mandatory annuitization. In fact, Bush has endorsed a more expensive, unregulated, decentralized system. If less rosy economic forecasts are taken into account, the return for retirees of Bush's Social Security plan sinks well below the 20 percent cut the Century Foundation projects.

Bush's plans for federal entitlement programs--and some Democratic plans that also embrace partial privatization based on alarmist rhetoric of Medicare and Social Security "crises"--will destroy hard-won protections of elderly and disabled people's health care and retirement. Many of these beneficiaries are not a good risk for private health insurers. Many will not be big winners in the stock market, either.

The idea that their survival and well-being should be guaranteed only so long as it is profitable for private companies to take them on as clients is simply cruel.

In the greatest period of wealth our country has ever known, it is outrageous for this Administration to claim that we can't afford to safeguard the health and retirement security of our most vulnerable citizens. What we really can't afford is to give away their health care and pension money in the form of a giant tax rebate for the rich.