The Time of Our Lives (25 page)

CHAPTER 15
 

Balancing the Book of Life

FACT:
When Richard Nixon opened the door to China in 1972, the Chinese were living a nineteenth-century way of life and were in the midst of a cruel so-called Cultural Revolution, Mao Zedong’s attempt to reignite the fires of Communist passion. Less than half a century later, China has become the second-largest economy in the world, pressing for number one, and scholars are projecting that the twenty-first century will be for China what the twentieth was for the United States.

QUESTION:
Are you ready to concede the title?

THE PAST

After almost a half century as a journalist I have an abiding faith in the wisdom of the American people to get it right for the long haul. I’ve been on the streets of urban and rural America when I thought violent racism and rage against a distant war might so shatter us that we would not be healed for generations to come. I had a close-up view of a felonious president taking the republic to the edge of a constitutional crisis before he was forced to resign. Other presidents tested the limits of their power and the patience of the voters with their personal failings or political hubris, inadequacies, and grave misjudgments.

In what may have been the most consequential confrontation in history, we won the Cold War and helped manage the largely peaceful breakup of the Soviet Union, a monumental achievement. Conversely, we were completely unprepared for the deadly realities of Islamic rage, and for more than a decade we’ve been struggling to find an effective response.

We have a challenge of a similar if not greater magnitude in filling the sinkhole that opened suddenly and swallowed whole sectors of the economy, exposing the fatal frailties of venerated financial institutions, ripping away the foundation of the American Dream—home ownership—and exposing the folly that the boom would go on forever.

We’ve recovered from every one of the earlier assaults on what our forefathers called “the general welfare of the people” because of the resilience of the citizens of this immigrant nation. Even in the darkest moments, wisdom and resolve crossed class lines, from blue-collar communities to the paneled halls of our most elite institutions.

There are new realities now for America that cannot be vanquished solely with the comforting thought “We’re still the greatest country in the world. We’ll get out of this somehow.” In fact, it will require more than national pride.

When we emerged from other recessions in the 1980s and ’90s, we did not have China and India coming up fast on the inside track. The historic advances of China can be summed up in one startling statistic: In 2005, China’s economy was half the size of Japan’s, which at the time was the second largest in the world. By 2010, just five years later, China had passed Japan and had its sights fixed clearly on the United States as the number one global economy.

Moreover, in the earlier recoveries at the end of the twentieth century the baby boomers were at the peak of their spending power. Now they are entering the age of
taking
instead of spending, receiving Medicare and Social Security. As life spans are extended, who will take care of the parents and grandparents and at what cost?

THE PRESENT

Many voices are warning of the coming collision between expectations and costs in fulfilling the commitments of the so-called entitlement programs. Niall Ferguson, a Scottish-born Harvard professor of financial and economic history, is an outrider on this subject, shouting out to the aging herd of boomers, “What now?”

He puts their dilemma in stark terms. “There’s been a very substantial number of people, coming up to retirement, who’ve had absolutely no income growth over the last ten or twenty years—white-collar and blue-collar alike.”

Ferguson’s speech cadence goes up a notch when he says, “Americans talk sometimes as if they don’t have a welfare state. I find that bizarre! You have a huge welfare state in the form of Medicare and Social Security. The costs of these systems are completely out of control. While the prices of most things have come down in terms of inflation, the cost of health care for the elderly has been explosive.”

Here are some numbers to keep in mind. Almost one-third of
all
Medicare expenditures every year go to the 5 percent of the beneficiaries who are afflicted with terminal illnesses or are dying of old age. So when health care costs are debated it is a cheap shot to attack necessary end-of-life discussions as “death panels for Grandma.”

In Oregon, a state with a program for physician-assisted dying, a study found that patients who requested the advice of doctors were primarily interested in dying at home and being in control of their circumstances. Other studies have shown that dying patients who discuss their options openly with a physician account for about 60 percent less in costs in their final week of life, to say nothing of the emotional costs that are saved when the family is on board with the plan.

Apart from the end-of-life decisions, Ferguson likes to remind his students and others, “We have institutions set up for life expectancy closer to seventy than the mideighties and still we’re organized to have people stop work in their early to mid-sixties.”

If the arithmetic isn’t changed, Ferguson warns, the United States will end up like a Latin American economy because our finances are permanently off-kilter. He reckons if nothing is done, the unfunded liabilities for Social Security and Medicare will reach $100 trillion by 2050. Ferguson is part of a large chorus of people warning of the destructive effect of an aging population and an unreformed entitlements program. It’s been the stuff of think tanks and academic abstracts for years. Former U.S. Commerce secretary Peter Peterson has been a nag on the subject for as long as his friends can remember. When he finally cashed out on Wall Street, he set aside a considerable chunk of his fortune to make the public more aware of the long-term consequences of delaying resolution until an uncertain date in the future.

It’s a subject that appears regularly on the Sunday talk shows and in opinion columns. Major health care delivery systems, such as the Mayo Clinic and the Cleveland Clinic, warn they won’t be able to remain economically healthy if Medicare isn’t reformed for the long haul. Nonetheless, the subject has been politically radioactive because older generations of recipients are militant defenders of the status quo.

It wasn’t until the spring of 2011 that the debate took a new turn when Republican congressman Paul Ryan of Wisconsin, a politician with the face of a choirboy and the resolve of a Marine drill sergeant, proposed a radical new plan and forced a vote in the House of Representatives.

Ryan’s proposal touched off an immediate backlash from Medicare recipients and leading Republicans quietly took a step back, but it was the prelude to an even larger, more divisive battle to come over how to reduce the national debt.

By July 2011, President Obama and congressional Republicans and Democrats were in an ugly, drawn-out fight over a plan on how to cut federal spending. The contentious feud moved from the White House to the Capitol, from the cable networks to the editorial pages, back and forth for most of the month with the exchanges becoming more acrimonious with every passing day.

They were trying to formulate a plan of some kind before August 2, when the United States had to temporarily raise its debt limit so it could pay due bills. But the far larger influence was the Tea Party Republicans in the House and Senate who would not be moved on the issue of raising additional revenue in any form to help with the balance sheet.

Tea Party members and their sympathizers did not represent a numerical majority in the Congress but through their determination and discipline they defined the debate and dictated the outcome.

The stumble-to-the-finish-line compromise was so patched together and the process was so maddening that America’s creditworthiness was downgraded by S&P for the first time in U.S. history. That in turn set off wild gyrations in the markets.

Tea Party members put all the blame on the administration, further infuriating their critics. The larger political lesson, I think, is that the Tea Party demonstrated the power of discipline. As I said on
Meet the Press
, they played by the rules. They got angry, they got organized, and “they got here”—Washington, where they did exactly as promised. What that means for the long-term interests of the country and the political system will be a front-and-center issue in the 2012 presidential campaign.

A significant part of that debate will be the role of entitlement programs in our national future, rightly so.

The summer Meredith and I were married, 1962, her father’s physician partners gave us a series of dinners and the discussion was often about the early stages of the Medicare debate in Congress. To a man, they were adamantly opposed. They reflected the view of the American Medical Association that it was an attempt by the government to take over medicine.

At the time, my beloved grandmother Ethel was beginning to have health problems that would eventually lead to long-term care. Neither she nor my parents had the financial resources to make that kind of a commitment, so I became the lone voice at the table advocating Medicare.

There I was, a brash twenty-two-year-old, not yet with a job, arguing with my future father-in-law and other pillars of the community that the least we can do as a society is take care of the elderly indigent when they become ill. Occasionally the discussions became pretty heated, so my mother took me aside and said, “If you don’t shut up, Dr. Auld will call off this wedding.”

Thankfully, he did not, and three years later Medicare passed, the backbone of what President Lyndon Johnson called his Great Society program. By modern standards, it was limited in scope. It did not cover doctor’s visits or prescription drugs, long-term catastrophic care, or the many expensive procedures that became routine with the rapid advances in medical technology.

Still, it was a bonanza for the medical community. Physicians were guaranteed payment for treating a class of patients that had heretofore been a financially risky proposition: the elderly poor. In the early stages of the program doctors formed partnerships and opened X-ray and other testing centers to which they would refer their Medicare patients, a practice that gave them a double dip out of the payment system.

On the patient side, it was not just the elderly poor who benefitted. Wealthy Medicare recipients took full advantage of the program. A friend, one of the country’s leading hand surgeons and a man interested in health care reform, was exasperated when he told me, “Some of my patients are among the richest people in the country and it’s not unusual for them to say, ‘I just want you to do what Medicare covers.’ ”

Personally I have long believed we have to apply greater means testing to Medicare, and based on informal surveys of well-to-do recipients the time to do it is now, given the stark financial consequences of not taking bold action soon.

We’re rapidly approaching the time when handwringing, debate, and anxiety give way to paying the balance due for the crush of elderly boomers coming into the system.

Without reform, the American middle class, which represents the heart and arteries of the American economy and political culture, will be in a constant state of financial stress and anxiety. Elizabeth Warren, a Harvard law professor and architect of President Obama’s Consumer Financial Protection Bureau, has another set of concerns about the continuing pressures on the middle class. Warren was chief adviser to the National Bankruptcy Review Commission and is the author of eight books on credit and economic stress.

Warren was a sharp critic of the original Troubled Asset Relief Program (TARP) initiated by Treasury Secretary Henry Paulson and approved by a bipartisan vote of Congress in the closing frantic days of the Bush administration, when it seemed the world financial systems were about to collapse. To be fair, Paulson was operating without a net in emergency circumstances as he tried to keep some of the world’s largest banks afloat with infusions of cash to be paid back once the crisis passed. The specter of a worldwide depression was not an exaggeration.