S&P's downgrade "analysis" makes it clear that we need to "contain" the growth of entitlements. EG, in discussing their displeasure with the budget plan, they note:
...the plan envisions only minor policy changes on [sic] Medicare and little change in the other entitlements, the containment to which we and most other independent observers regard as key to long-term fiscal sustainability.
Now, look at the below list of countries that both maintain a triple-A rating from S&P (though some are on their downgrade watchlist) and have some version of universal health coverage, in other words, an "entitlement" that goes much further than anything we've got over here.
Source: Huffington Post
That doesn't imply Medicare is on solid footing. But the problem is the growing cost of health care system wide (in fact, cost pressures are worse in the private sector), and the solutions exist in every other advanced economy, as they essentially cover their whole populations and do so for about half of what we spend relative to GDP.
Yet, S&P needs to see cuts in Medicare if we want our triple-A rating back.
Now, I really don't need to see the rating agencies get into the analysis of comparative international health systems. I'd be content if they did a better job on stuff like, oh...I don't know...mortgage back securities.
But if they're going to make judgments like this, then they should do it right. An honest analysis of fiscal sustainability would point toward a larger, not smaller, role for publicly provided health coverage.
This post originally appeared at Jared Bernstein's On The Economy blog.
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