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The Distortions of Sebastian Mallaby on Social Security


As U.S. midterm elections near, the topic of political honesty draws some pundits like moths to light. Take Sebastian Mallaby in the Washington Post of October 23.

“Every honest politician knows that entitlement spending on retirees is going to bust the budget,” Mallaby writes. “But since the failure of Bush’s proposed Social Security overhaul last year, nobody is doing anything about it.”

Presumably, these honest politicians are aghast at rising costs for Medicare, which provides health care to Americans age 65 and up, plus some disabled recipients of Social Security. We turn to the Medicare prescription drug benefit bill, known as Medicare Part D.

The GOP Congress claimed that this bill would foster competition. But first, the heavy hand of government had to go. This would help to free competition.

As competitive pressures rose, private drug prices would fall, the GOP promised. Americans covered by Medicare would benefit from lower costs.

Instead, Medicare Part D has mainly helped insurance and pharmaceutical companies. What happened to the promised price competition? In brief, the prescription drug benefit bill banned Medicare from negotiating lower drug prices with insurers and pharmaceutical companies.

By contrast, the U.S. Veterans Administration and nations such as Australia and Canada use their bargaining power to negotiate prices for many drugs with private companies. With such negotiations, the VA and these countries get lower drug prices.

Under the GOP-backed Medicare Part D, the insurance and pharmaceutical companies successfully lobbied the U.S. Congress to kill competition. The corporations in these industries got what they wanted”monopoly profits. Predictably, that monopolization of prescription medications drove up the costs for millions of people covered by Medicare.

Companies such as Merck (Zocor/cholesterol), Pfizer (Lipitor/cholesterol and Zoloft/anxiety) and Wyeth (Protonix/heartburn) reaped billions of dollars in windfall profits, according to economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, DC. “The excess profits for the drug industry as a whole will be close to $50 billion in the first full year of the Medicare drug benefit program,” he added.

The lesson in this Medicare drug bill is clear. Industry monopolies drive medicine prices up, not down. Senior and disabled Americans can thank the GOP Congress for that.

No wonder the cost of the U.S. health care system is outstripping the rate of inflation. Meanwhile, scriveners such as Mallaby pontificate about politicians needing to cut entitlement spending, a so-called ticking time bomb in the federal budget. For him, slowing the out-of-control price increases of U.S. health care is not an issue.

And why is there a need to overhaul Social Security? The 2006 Social Security trustees’ report, the standard basis for Social Security projections, says Social Security will be able to pay 100 percent of its scheduled benefits through 2046 with no changes needed, according to the nonpartisan Congressional Budget Office.

Recall that President George W. Bush tried with little success to convince the U.S. public that Social Security will face a future cash crisis that requires reform now. Dramatically, he failed to persuade the American people that a way to save Social Security was by creating private accounts for younger workers to own.

Under the president’s plan for Social Security, young wage-earners would have a chance to join his “ownership society.” And the same private accounts for Social Security would generate big fees for the financial services industry, a large source of campaign funds for the GOP. “Every honest politician” should know that.

SETH SANDRONSKY is a member of Sacramento Area Peace Action and a co-editor of Because People Matter. He can be reached at:




Seth Sandronsky is a Sacramento journalist and member of the freelancers unit of the Pacific Media Workers Guild.

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