Asymmetrical Information

In a speech Bush made last Friday said that a large amount of our Medicare and Medicaid money is given to trial lawyers and that must stop.

It is an obvious solution to our fiscal problems with medical care.

One of the major obstacles in solving the social security (and other) problems is the lack of good information. The federal government's method of accounting produces such misleading results that, if published by someone esle, the accountants would be sent to jail. It would greatly help if the governments books were modernized and kept on an accrual basis. Then, people would see the true cost of the programs Congress adopts.

You know, if we don't fix the health care problem, the social security problem won't be quite as insurmountable.

I'm just sayin'.

How familiar.

R: "Let's solve the [Social Security/Iraq] problem.

D: "But [Medicare/Saudi Arabia/North Korea] is a much bigger problem!"

R: "What do you want to do about [Medicare/Saudi Arabia/North Korea]?"

D: "Nothing."

The present value of the unfunded SS liability is $5.7 trillion (over 75 years, much larger open ended) say the Treasury's latest numbers.

This is non-trivial in anybody's book -- and includes an extra near $500 billion for SS in 2005 alone.

As to why fix this very non-trivial if "lesser" problem first, the answer is because we can. It has been studied up and down and over since the SS Advisory Commission of 1994, and the answers are all there -- specific answers -- if only there is the will to do them.

In contrast, Medicare and Medicaid are a huge mess and nobody has any plausible answers for them.

So saying "Do health care first, not SS, even though we can do SS" seems pretty much like a ploy to preserve the status quo and do nothing.

Unless, of course, one actually has a solution to propose for health care first. Does one??

"...the people saying 'Social Security's not the problem, Medicare's the problem!' in general show an astonishing lack of interest in fixing Medicare..."

Exactly.

As Moynihan used to say, "Social Security is easy, Medicare is going to be hard, if we can't fix Social Security then ...."

What I found to be so unrealistic in the Social Security fix that jane linked to the other day was that it only increased retirement age to 68. As more and more people live into their late 80s, and even into their 90s and beyond, it just isn't realistic that people only work 2/3, or even less, of their adult lives prior to receiving retirement benefits. Having both parents of young children working full time, in order to pay the benefits demanded by healthy 70 year olds, has no economic or moral basis.

Will,

What I found to be so unrealistic in the Social Security fix that jane linked to the other day was that it only increased retirement age to 68. As more and more people live into their late 80s, and even into their 90s and beyond, it just isn't realistic that people only work 2/3, or even less, of their adult lives prior to receiving retirement benefits. Having both parents of young children working full time, in order to pay the benefits demanded by healthy 70 year olds, has no economic or moral basis.

By this logic, no one should be able to retire until they had spent 20 years in their cryogenic capsule. The majority of recent and ongoing life span extension results in relatively little useful productivity, no employer demand, and little voluntary supply.

Regards, Don

I think its a question of priorities. The government has a budget problem. What is the first thing that's going to be cut? First, programs that don't exist yet - e.g., increases to entitlements. Second, large existing programs from which small cuts can produce large amounts of revenue - e.g., entitlements, particularly Social Security.

Should the cuts be made to Social Security? That's debateable. Will they be made to Social Security? Yes, because that's the easiest way to solve the problem.

Jane,

...While under statute, benefits are supposed to be slashed to meet revenues when the "trust fund" runs out, there seems litle realistic possibility that Congress will allow benefits to be suddenly slashed to 70% of their previous levels....

This is a lead pipe cinch. The cost to the Treasury to make up the 30% shortfall in the first year of trust fund exhaustion with new borrowing from the public will be almost identical to the cost in new borrowing in the previous year to redeem the last of the pseudo-bonds in the trust fund.

The exhaustion of the trust fund is analogous to making the last payment for an auto loan and making up the shortfall is like immediately taking out a new auto loan with the same payments.

Regards, Don

"and when it finally breaks down, either young workers or senior citizens--and probably both--will find themselves in big trouble."

Should continue ",and pissed off." I predict Democrats will blame Republicans, and Republicans will blame Democrats. I've always felt if we can just get Washington to do the things we all know we should do, and how to do, that would be great. But instead, the attitude seems to be, well, Social Security isn't COMPLETELY broken yet, so let's keep demagoguing other stuff. It reminds me of when Congress rushed to spend the "peace dividend (and more)." Expecting Congress to make a truly tough decision shouldn't be part of the discussion, and there's no emerging consensus yet on the health care issue, so I can't imagine any real treatment of health care for a while yet.

So let's fix SS now. Frankly, I don't think upper-middle-class-and-up types plan on receiving much in the way of SS benefits, or feel they'll maybe just be a nice little add-on. Some kind of pull back on time and amounts will be acepted without too much bitching. Jeez, can Congress not even deal with that? The years of talking about it have created a feeling among the chattering clases that maybe we will need to do something sometime, so let's not waste that.

Mike W,

I gather from your comment that subjecting up to 80% of social security benefits to the income tax is insufficient punishment for those who have "won life's lottery" and "don't need the money".

I would remind you that those of us who are now retired did not have access to 401k or 403b programs or IRAs during our entire working lifetimes, as is the case for many of those still working.

I presume you would also favor delaying and reducing Medicare benefits for those who "don't need the money".

I paid both social security and medicare taxes for my entire working life, in exchange for a "promise" of continuing income and medical coverage upon retirement. I expect the federal government to hold up its end of the bargain now that I am retired. I gather you believe this is unreasonable on my part.

Ed, the "promise" is based on a huge lie. So, yes, I for one think you are being unreasonable. You knew you were being lied to and you did nothing.

they are often the same people who want to add nationalised health insurance to the budget, which seems to betray a lack of committment to solving our budget problem.

What a bizarre statement. These people want to nationalize health care AND raise taxes significantly. Whether or not that's a good idea, long-term deficits aren't necessarily a feature of this policy.

Well, we wouldn't have a deficit problem at all if legislators were willing to raise taxes and cut spending. Let's say, rather, that it would add to the financing problem.

I'd argue that the relevant question, for the US taxpayer, is not the accounting distinctions that the US government makes, but what percentage of (tax revenues + borrowing) is devoted to paying Social Security benefits.

Me too, Jane. Or even more broadly, what percentage of the economy as a whole is devoted to paying Social Security. My problem with the whole "Medicare/Medicaid is a bigger issue" argument is that, generally speaking, the people making this argument don't want to do anything substantive about either challenge if it doesn't involve raising taxes.

The fact is we know of a relatively simple and genuninely pain-free way to reduce the longterm cost of the Social Security program (give less or no money to retirees who don't need it). Healthcare costs in general present a more complicated situation, and obvious solutions don't present themselves. Thus my conclusion is: let's take take the low-hanging fruit of entitlement reform -- namely, means-testing Social Security.

I mean, financing Social Security may not be as big a long term threat to living standards as Medicare/Medicaid, but so what? It's still a huge program. It still spends money on rich people who don't need it. Perhaps most perniciously of all, it is funded via a highly regressive tax on jobs. Yeah, maybe we'll "only" need to be putting an additional 3 points of GDP into Social Security in the year 2050, but that 3 points (nearly $400 billion in 2005 terms) will be wrung out of the relatively narrow base of workers' paychecks and employment prospects if the funding mechanism remains the same as today's.

And besides, if the challenges on the healthcare finance front really are as daunting as they appear to be (and I don't doubt they are) we'll need all the help we can get. A smaller Social Security bill will only help the government in this regard.

P. B. Almeida,

I assume you are in favor of means testing only social security benefits, not the social security tax. That would make the social security tax a surtax on high earners, as well as on those who save for their own retirement. Nice!

I also assume that the fact that someone has paid into the SS system for their entire working life has no bearing on whether or not they are "entitled" to receive a benefit from this entitlement program.

If that is the case, why not just relabel both Social Security and Medicare as welfare programs, because that is precisely what they would become. Once the concept of entitlement is eliminated, it would be much easier to reduce funding for the programs. That should help a lot.

Jack Wayne,

Do I hear you suggesting that SS is a Ponzi scheme? If that is the case, who goes to jail?

The solution to the healthcare problem is simple, although politically difficult: just make beneficiaries responsible for end-of-life costs.

The estimates I have seen say 50% of Medicare costs are incurred in the last month of life, and as much as 80% in the last 3 months. Much of this occurs in this type of scenario: granny is in the hospital for something like the flu, no one bothers to discuss a No-Code order, her heart stops and the code team rushes in, cracking her ribs and sending her to the ICU for a month of drug-hazed existence with a ventilator and feeding tube until nature finally takes its course. That month can easily cost $100,000 and the statistics I have seen say that a 75 year old woman who is coded has less than a 1% chance of leaving the hospital alive.

There are many potential actions, from Medicare refusing to pay for an ICU bed to lower co-pays when a No-Code order is in force. But the bottom line is that patients and families have to realize that death is inevitable and there is rapidly increasing cost to holding it back once one reaches the 'natural' end of life. If someone wants to spend their inheritance on a 1% chance of a good outcome, more power to them, but Medicare is in trouble because it is taxpayers that are on the hook for a private decision.

Of course politicians have a tough task since no one wants to deny the tearful family who just wants to know that 'everything possible was done' for dear old granny.

Mr. Reid,

While I understand why you'd expect the government’s promises to be kept, my problem is that those promises (which were made by politicians who in most cases are dead and/or retired) are to a significant portion of my income. I certainly don't think your view is unreasonable, but on the other hand I never agreed to them, and so I don't feel obligated to ensure they are kept.

We all know what is going to happen. The prolifigate Boomers will raise our taxes.

First they'll spend their children's inheritance, and then they'll spend their children's paychecks. What they'll never do is face the problem now, before it is too late, or tighten their belts later once the problem grows to fruition.

Only a miracle can prevent this.

"If that is the case, why not just relabel both Social Security and Medicare as welfare programs"

And that's exactly what it should be. SS is a terrible "investement" program; welfare is its only justifiable component.

Ed Reid:

That's what I've been saying here for months. Once you separate the taxes from the benefits, it's no longer a retirement savings system but a wealth-transferring welfare scheme. Then nobody should feel any obligation to fulfill promises made by dead people to pay off the debts that other dead people kicked down to us when they made us pay for their windfalls.

Ed Reid,

I completely respect your position. The government should keep its word. I think the baby boomers should get what they were promised too. We have been paying in extra to build up that trust fund, after all.

But the real question is, if the government is unable to keep its word, who should pay the price? And with all due respect to you sir, you're not really a part of that debate. Its between the baby boomers and their children.

How good are the long-term projections of national wealth anyway? It seems to me that if Kurzweil et al are right about the "singularity" of technological growth, then there's no long-term problem as long as we make it to the long-term (we might not). Short-term problems (next few decades) may be serious, but not long-term. I've basically believed in such thinking since 1977, specifically since going as a graduate student to "IJCAI 77", the "International Joint Conference on Artificial Intelligence"; my techno-optimism mixes with political pessimism, but my point is that anybody talking about running out of cash in, say, 2040, is assuming the irrelevance of many doublings on Moore's law and various related laws; or assuming that such exponentials simply stop coming. Or am I totally off-base here? Education appreciated, always.

I'm happy to have a rule that says that, beginning with those now 55 and younger (I'm 53), we have no excuse for not seeing the problem, and therefore no socsec payments will be made to any year-cohort until 50% of them are dead -- or make it N% where N is whatever it would have been for the original Social Security; anybody know? But I think the real problem is growth. If we have growth, old-age expenses are okay. If we don't, they're not. Free trade, biotech, nanotech, robotics -- those are central to solving old-age expense (especially if old-age gets extended indefinitely, as Kurzweil expects.)

No, Randy, it's between everyone who's working today and the people born between 1875 and 1922. But they stole our $10,000,000,000,000 and took it to their graves. That's the problem.

I assume you are in favor of means testing only social security benefits, not the social security tax.

I favor means-testing SS benefits but ideally getting rid of the Social Security payroll tax itself. I'd much rather see it funded out of general revenue. I truly detest the very concept of payroll taxation.

I also assume that the fact that someone has paid into the SS system for their entire working life has no bearing on whether or not they are "entitled" to receive a benefit from this entitlement program.

I personally don't think it's absolutely necessary to means-test the benefits of people who are already retired (though you wouldn't have to twist my arm to cut, say, Ross Perot's or Warren Buffet's check if such a move were politically feasible). The president's plan would have us not touching the benefits of anyone already retired, but reducing benefits to future retirees according to a formula that takes earnings into consideration (as well as benefits they've paid in according to "old rules"). I think such an approach is reasonable, because the people who would lose the most government cash are the people who are i) the richest and ii) who have the most time to prepare.

If that is the case, why not just relabel both Social Security and Medicare as welfare programs, because that is precisely what they would become.

I have no desire to demean people (such as my own mother) who depend on the program. If the word "welfare" is offensive, I'd be happy to use the term "safety net". I think that's what Social Security should be, and how it ought to be structured: a safety net to protect the vulnerable run on the most economical basis possible. Giving money to a 80-year old millionaire isn't my idea of necessary, and so by definition is wasting money (the opposite of "economical").

Growth solves nothing because SS benefits are indexed to wages. Linking benefits to prices and not wages is a completely fair and reasonable first step that would ameliorate much of the problem. But if you look at demographics and voting patterns, you will see that this will never happen. The only "solution" in the end will be back-breaking tax increases on the workers.

Steve SC's warning of euthanasia seems spot on.
A health care insurance professional told me the
last cohort of Boomers is likely to suffer under Medicare/Medicaid cuts. Says he, be prepared to end your life in a twenty room ward where aides who can barely speak English keep you alive -- unless you have private long term care insurance.
He also predicts "right to die" laws will sweep the nation, so 95 year old granny can decide to die in dignity instead of in her fouled diaper.
So all you 40 yr old Boomers need to combine with
the X and Y people to demand politicans end the nonsense now.

I favor means-testing SS benefits but ideally getting rid of the Social Security payroll tax itself. I'd much rather see it funded out of general revenue. I truly detest the very concept of payroll taxation.

I would too, if we had a flat income tax. With progressive taxation, getting rid of the payroll tax would only make governance in this country worse. Even people who pay little to nothing in income taxes pay something in payroll taxes, so they have some small interest in economic growth and spending restraint. But if *everything* the government spends gets paid for with revenue from progressive individual income taxes, many, many people will get the complete package of government largesse while paying almost nothing for it. This is how republics collapse.

Ed(2):
Do I hear you suggesting that SS is a Ponzi scheme?

I don't know if that's what Jack Wayne meant, but yes, it's a Ponzi scheme.

If that is the case, who goes to jail?

FDR.

Joe Schmoe:
The prolifigate Boomers will raise our taxes.
First they'll spend their children's inheritance, and then they'll spend their children's paychecks.

Pretty much. As a post-boomer, and therefore a member of a smaller demographic, I have always expected to be fully taxed to pay for the boomers' retirement, and then to see the programs eliminated before I could draw from them. With any luck, furious saving over the next decade (and squirreling some of that overseas) will help me to scrape by, despite skyrocketing taxes and the elimination of S.S., Medicare and the like.

Maybe Kurzweil's thesis will save me, instead. But I'm reluctant to bet my entire financial future on it.

Your entitlement to benefits exists entirely at the whim of the legislature, as it always has. While you have an enforceable property right in your benefits, in a limited sense (in that the government would have to provide due process before cutting your specific benefits) those benefits as a general matter are determined by the legislature. They cut the benefits as a whole, you lose. You have no enforceable right to the old benefits. That's the law.

I've seen many comments about how the boomers are responsible for the problems with Social Security. My first thought was that this is totally wrong, as it was we who have been paying in extra all these years.

But on second thought, I think it is our fault. We were old enough to vote in 83 and should have simply forced the government to come to terms with the problem then and there. Also, we have done nothing serious to put the brakes on government spending in the last few decades. So it is indeed our fault. What can we do to fix it? Refuse to allow any fix for Social Security or Medicare that involves higher taxes. And vote for politicians who will reduce all forms of government spending.

In a sense the SS crisis is the Boomers' fault, but they aren't the ones who designed a flawed program, and there was a whole 'nother generation before them that still had a chance to fix it. The Boomers have been in charge on the recent watch, however, when it became clear to non-economists how big the problem is.

Here's another thing the Boomers are at fault for: not having enough kids to keep the Ponzi scheme going. That was our only hope.

AT -

If I'm not mistaken:
1) Over the last thirty years, the income tax has become less progressive
2) Over the last thirty years, spending restraint ("governance") has gotten worse.
3) The only exception to this trend (the 90s) saw more progressive taxation and more spending restraint

I know the dangers of straight-line extrapolations, but I'm having a hard time seeing what makes you believe that flatter taxes = better governance and more progressive taxes = worse governance.

I know it works in theory, but, in theory, my Cisco stock was correctly valued back in 2000. Ever since, I've had a strong preference for reality over theory.

Ed Reid-

No, I think you should get your benefits. I don't expect to get, nor am I counting on getting, mine, and if you're my age (43) or 10 years older or younger, you're foolish for leaning on the hope of getting what that ridiculous letter you get every year says you're going to get. Do you really think Congress is looking out for you?

AT says "Growth solves nothing because SS benefits are indexed to wages" and of course in a sense that's obviously true. Nonetheless I do think that growth is central; it's my understanding that without growth, changing the indexing won't fix the problem.

With adequate growth, we have the money to pay for old-age expenses including medical. Yes, the indexing would have to change eventually, but this would be relatively painless: people who are now young and have doubts about SS anyway (polls, anybody? I think that's true, but I lack data) would instead just be told that as retirees, they wouldn't keep getting richer as fast as their still-working juniors. (You don't even need price-indexing, you can go anywhere in between price and wage.)

Without growth, we just have an increasing ratio of elderly high-medical-expense people to younger people.

You're talking about how to distribute a pie so that nobody's hungry, even though the fraction of productive eaters, those who help grow/grind/bake that pie, is shrinking. I'm thinking that the size of the pie is not irrelevant in what kinds of plans are worth talking about -- in fact it's absolutely central. Make the pie higher!

http://www.snopes.com/politics/bush/piehigher.asp

So I'm wondering how good the long-term growth projections can actually be.

"It would greatly help if the governments books were modernized and kept on an accrual basis."

The Treasury does publish accrual basis accounts, it just doesn't publicize them (and Congress sure isn't going to!)

For the record, the 2004 accrual basis deficit was, according to the Treasury, $11.1 trillion, with a "t". Larger than total national income. That was due mostly to Bush's new drug benefit, about $8 trillion worth of one-time accrual.

The 2005 accrual basis defict is closer to $2 trillion: $300 billion general budget, + $470 billion for Social Security, + >$1 trillion for Medicare, + various odds and ends.

The present value of the debt owed to future beneficiaries is about $10 trillion. This implied debt exists now because generations have taken out of the system more than they paid in. No changes in future conditions can change that. It must somehow be repaid or defaulted upon. The only question is how.

Altho it is only 15 hours until I am 55 years old, I've never boomed a baby in my life. I've understood for 30 years (partly thru sitting thru an Amway presentation!) that SS was a Ponzi scheme and not to be depended upon. Not only have we made some effort to acquire money toward retirement, but we have gone thru much expense and heartbreak in an attempt to produce more than one child.

No, I think you should get your benefits. I don't expect to get, nor am I counting on getting, mine, and if you're my age (43) or 10 years older or younger, you're foolish for leaning on the hope of getting what that ridiculous letter you get every year says you're going to get. Do you really think Congress is looking out for you?

Mike W: You voice a commonly-held opinion, namely that Social Security benefits won't be around for today's younger workers.

I think this is bunk.

I think the much greater liklihood, and the outcome that I fear, is that the benefits will indeed be paid, no matter how high taxes have to go to insure the checks don't bounce.

I mean, for a good many years into the future, the cohort of people who are old enough to be eligible for Social Security will continue to grow as a percentage of the electorate. Indeed, given the proclivity of younger folks not to vote at all, I'd say the gray vote is only likely to get stonger for many decades. The track record of those who seek to lessen Social Security's burden on the economy is mostly (and sadly) one of political failure. Every year we advance into the future only makes that failure more and more of a sure thing.

I predict tomorrow's economy will see a combination of very robust Social Security benefits and very onerous payroll taxes. I hope I'm wrong.

I like the thought that it's the boomers' fault because we didn't have enough kids. So what are you postboomers doing pointing fingers at us? Get into the bedroom and have more kids yourselves!!

PB-

I see tinkering at the margins, akin to the plan Jane spoke of earlier. Higher taxes, to be sure, but also lower benefits, especially for wealthier people, and probably some delay of benefits. There is simply less resistance among upper-middle class people to having their benefits reduced, compared to any other group being impacted negatively in any way, and Washington will eventually figure that out. That's what they do - determine what people will stand for.

"It seems to me that if Kurzweil et al are right about the "singularity" of technological growth, then there's no long-term problem as long as we make it to the long-term"

This is true, but in practical terms it doesn't really matter. I also believe there's a decent chance we'll hit the singularity by 2040 or so, and if we do SS, Medicare, and everything else become non-issues because our wealth will be effectively infinite. In that case, it doesn't matter what we do, so we need to focus on the less attractive futures in which Kurzweil is wrong. (That's not entirely true, because decisions we make can affect the probability of achieving a singularity, but probably not by much and not in any predictable way).

"I favor means-testing SS benefits but ideally getting rid of the Social Security payroll tax itself. I'd much rather see it funded out of general revenue. I truly detest the very concept of payroll taxation."

Ditto. The payroll tax only serves to fool taxpayers into thinking that "their" money is being "saved" and will be "returned" to them later. It's just a tax, and SS benefits are just transfer payments. People to understand this before there can be any hope of reform; otherwise they'll whine about what they're "entitled" to by virtue of what they paid in. Like I said on the other thread, nobody thinks rich taxpayers should get more food stamps than the poor; SS should be no different. Unfortunately I also agree with your pessimistic predictions.

Brian: "[If Kurzweil is right], it doesn't matter what we do, so we need to focus on the less attractive futures in which Kurzweil is wrong."

I do see your point; I guess my problem here is that even if Kurzweil is wrong about an "infinite"-wealth singularity, the range of possible values for productivity growth strikes me as huge, and this discussion seems committed to a very small part of that range. I find it hard to understand how to take seriously a projection like the CBO's (GAO pdf) "Total factor productivity growth 1.4 percent through 2015 (CBO's August 2005 short-term assumption); 1.4 percent thereafter (long-term average from 1950-2004)". Okay, that just says "this is what happens if current trends continue", which is understandable, and it gives us a doubling-time of (ln 2)/1.4%= 50 yrs, about.

Kurzweil also projects current trends, but acknowledges that there are multiple current trends and that the faster-growth trends will, if continued, become relatively more important. Objects governed by Moore's law and other laws close to Moore's (with doubling-times of one or a few years) have been increasingly important and are becoming dominant in an increasing number of kinds of productivity.

To take CBO current-trend projection seriously, you have to say that won't happen: current trends (of increasingly automatic production of the means of production) will stop. Sure, Moore's law might hit bottom in a surprising way, but the notion of a programmable self-reproducing factory does not depend on Moore's law or on nanotech; it's older than both. So when I look at old-age-expense discussions, I wonder: what are the premises which justify a linear extrapolation of productivity growth, even though that productivity growth so far has been based on extraordinarily non-linear factors? I've never seen them expressed; hence my question.

Perhaps it would clarify the discussion to remind people that the only purpose for Medicare is to keep people healthy enough to collect Social Security, which is a monumentally stupid idea.
The government is not responsible for your health or your retirement. Expecting the government to pay for what you can't afford is no different than robbing your neighbor to satisfy your whims -- both actions are morally reprehensible.
You can't afford the operation? Don't have the operation. Can't afford retirement? Move in with family.

You can't afford the operation? Don't have the operation. Can't afford retirement? Move in with family.

Don't have family? Search for charity. Can't find charity? Wither and die on the street. The "bring out yer dead" guy will ring his usual gong at 10am on Thursdays, and if you're lucky, see your corpose lying there and give it a proper mass-burial.

I'm not in favor of the young paying for an extended golden-years vacation for the old, but where is the sense in abolishing all safety nets?

The issue isn't one of safety nets. The issue is your right to forcibly appropriate your neighbors wealth. If you'll note that I don't mention anything about private insurance or pensions which allows you to set aside your own resources to pay for health or retirement. If you choose to not provide for yourself that does not create an obligation on the part of your fellow citizens: if they choose to provide you with public assistance or welfare, their moral obligation is only to provide minimum support, not to fund a comfortable lifestyle. And I am quite certain that my definition of minimum does not match yours.
And I will repeat my initial assertion: "the only purpose for Medicare is to keep people healthy enough to collect Social Security, which is a monumentally stupid idea."

If you'll note that I don't mention anything about private insurance or pensions which allows you to set aside your own resources to pay for health or retirement.

M -- This is the stuff of sheer fantasy. Even quite affluent people who are dilligent about saving will likely not be able to self-insure in the face of a major illness. And that's exactly what they'll need to do -- self-insure -- once they reach a certain age and no rational insurer will take on their risk (and if they're sufficiently unlucky in the genetic lottery to have a serious precondition such as MS, they won't have to wait until they're old to be facing a life without the possibility of health insurance).

I have sympathy with your point of view when it comes to retirement savings, but when it comes to healthcare, the seemingly intractable challenge of adverse selection means government is likely to remain in the picture as an insurer or reinsurer of last resort for the forseeable future.

all this is much ado about nothing. over time the retirement age will be raised to 72. the indexing will be to inflation and not to payrolls ( why should retirement benefits be indexed to pay raises to begin with?). the payroll tax will rise from 6.2% to probably 8.5% on both employees and employers. the cap will rise from 90 thousand to 500 thousand in today's dollars. medicare will rise from 1.45% to 3% on both employees and employers. worse case scenario instead of these taxes levied solely on income they will be levied on all forms of revenue. expect benefits indexing to be frozen for two or three years while the transition occurs.
painful yes. unbearable, no. if congress cuts other spending and lowers and simplifies other taxes it should not hurt growth. if.
few of us voted for FDR or LBJ but all of us who pay taxes will have to cover their checks.
one thing though is health care. many doctors are fed up with medicare and are limiting the number of medicare patients they will take or stop accepting medicare altogether. keeping that in mind look to see medicare morphing from a pre- paid health plan to more of a true insurance plan with larger out of pocket payments and deductibles as the beneficiaries pay out of pocket to the doctors and file claims with the government.

P.B. --
Why does your need for healthcare entitle you to take a dollar (or a million dollars) out of my pocket or your neighbor's pocket or your grandmother's pocket? Short answer is, it doesn't. It is morally indistinguishable from holding someone up at gunpoint -- the pretense that it is not you but the government that is holding the gun is a canard -- it is the simple assertion that your needs/desires supercede someone else's (they don't). When confronted with a need or desire for a higher-valued resource, an individual must decide what lower-valued resources he/she will forego. If that means disposing of assets in order to afford the higher-valued resource, that is what needs to be done. And, like it or not, healthcare is a resource like any other. Medicare should be abolished. Or, if the more tender-hearted prefer, Medicare should be mutually exclusive with Social Security. At least that way, we are not paying to keep people alive just so we can pay them Social Security.

M,

Re; "Why does your need for healthcare entitle you to take a dollar (or a million dollars) out of my pocket or your neighbor's pocket or your grandmother's pocket?"

Its a matter of moral perspective. From the moral perspective of the individual, no one has a right to require sacrifice from another for any reason. But from the moral perspective of the state, the state can require sacrifice for any number of reasons. The usual justification in a democracy is utilitarian - for the greater good.

The problem with your argument is that it is from the moral perspective of the individual. But relevant arguments concerning matters of public policy must be from the moral perspective of the state.

It is interesting to me to see the same individuals choosing different moral perspectives for different issues. E.g., those who argue that the state does not have the right to require sacrifice for war, but does have the right to require sacrifice for social programs - and yes, I do it too.

multiple choice:
The Social Security Trust fund is:
a.) A useful way of keeping track of the current cost of future retirement benefits. The trust fund represents the current value of money that we will have to come up with in the future to pay promised retirement benefits.

b.) A scam by politicians to get people to pay more taxes by telling them that they're going towards social security and not other government programs that people feel are wasteful.

c.) A pile of worthless IOUs sitting an a safe in West Virginia with both the payer and payee lines filled in with "U.S. taxpayer."

d.) A means of shifting part of the cost of babyboomer retirement from regressive payroll taxes to progressive income taxes. The trust fund will ultimately be paid back primarily by future taxpayers through income taxes.

e.) all of the above.

The answer is e. And of course there is no choice f.) A collection of real assets that the Government can cash out when needed in the future.

Why does your need for healthcare entitle you to take a dollar (or a million dollars) out of my pocket or your neighbor's pocket or your grandmother's pocket?

Because the commandment "Thou shalt not steal" doesn't preclude the existence of government, nor does it require government to fund its operations from voluntary contributions. In short, when the government sends you a tax bill, it is not the same thing from the standpoint of morality as a mugger pointing a gun in your face and demanding your wallet and Rolex.

Once we've crossed this rubicon -- the idea that government can levy taxes -- we're now dealing only with the question of what is and isn't a legitimate item for government to spend tax money on. Nearly everybody in our society feels that, say, defending the borders, or protecting private property against fire, are legitimate items for tax dollars. Apparently a majority feel the same way about old age penury.

P.B.-
Good points, well-stated. My point is not that the government can't levy taxes. My point is that paying people with taxpayer dollars just so you can pay them more taxpayer dollars is stupid, wasteful, and morally unjustifiable. That a majority, plurality, or individual feel that they can use the government to rob their neighbor is a notion of which they must be frequently and vociderously disabused

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