Dean Baker: The Housing Crash and the End of Granny Bashing

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from TPM Cafe:



The Housing Crash and the End of Granny Bashing
By Dean Baker - June 24, 2008, 12:34PM



Today, David Walker, the former Comptroller General of the Government Accountability Office, is testifying before Congress about the need to clamp down on entitlements (i.e. Social Security, Medicare, and Medicaid). As everyone should know by now, the focus on "entitlements" is part of a dishonest effort to transform the country's health care crisis into a demographic problem.

Health care costs in the United States are out of control. We already pay more than twice as much per person as people in other wealthy controls and get worse outcomes. This gap is projected to expand in the decades ahead as our costs are projected to keep rising relative to those of other countries. Because we pay for close to half of health care through the public sector (primarily Medicare and Medicaid), the health care crisis, if not addressed, will create a budget crisis. We then lump Medicare and Medicaid in with Social Security, and voila!!! We have an entitlement crisis.

Today, we also received new data on house prices, with the Case-Shiller index (the best available house price index) showing that real house prices have been falling at 26 percent annual rate over the last quarter and are now down by 19 percent over the last year.

While David Walker's testimony on entitlements and plunging house prices may seem unrelated, the latter will soon make the former completely irrelevant.

The basic story is actually very straightforward. The granny-bashers are arguing that the country is paying more than it can afford to support retirees. Therefore they want to cut Social Security and Medicare, the main benefits that these retirees receive.

However, the implicit assumption behind these cuts is that retirees will have enough money to support themselves, even if these programs are cut. While this would not have been especially true even before the collapse of the housing bubble (Social Security already provided more than half of the income for two-thirds of the people over age 62), it is certainly not true in the wake of the housing crash. .......(more)

The complete piece is at: http://tpmcafe.talkingpointsmemo.com/2008/06/24/the_housing_crash_and_the_end/