Last week I examined the ethics of gradually indexing social security benefits to prices rather than wages. It has never been obvious to me that the elderly are the deserving recipients of greater largesse. Don’t we have better ways of spending the money, such as on biomedical research, immigrants, or foreign aid abroad? Why might you think that the elderly deserve a greater share of resources in society? Here are some options:
1. We should be egalitarians, and evaluate individual well-being in a "time-slice" rather than lifetime sense. Yes the elderly have lived a long time, but right now they are the ones closest to death and often poor as well. We should transfer resources to those who are not so well off.
2. The relevant political alternative is lower marginal tax rates for the well-to-do. Transfer resources to anyone but them, whenever you can.
3. True, the relatively wealthy American elderly are not our highest priority, all things considered. But in political equilibrium taking care of the elderly is unlikely to prove a substitute for other forms of charity. By cementing our self-images as being caring people, it renders other forms of charity more likely, not less likely.
I suspect that some version of #2 is what motivates most liberals. But consider a few points. First, is this the relevant political trade-off today? Can we not imagine a Republican-led Congress, for better or worse, determined to make the Bush tax changes permanent? Alternatively, you might think the tax changes are headed for repeal in any case, bringing us back to no trade-off. Might the real policy trade-offs involve Medicaid, immigration reform, and discretionary spending, not to mention the looming fiscal disaster known as Medicare?
Second, marginal tax rates for the wealthy cannot be the relevant political trade-off forever. It would be quite simple to favor repealing the Bush tax changes, and also wanting to price index social security benefits. Note that price or wage indexing is supposed to continue for the indefinite future. So we could arrive at your ideal tax policy — whatever that is and whenever that happens — and still face the social security issue.
I actually find #3 to be the stronger argument. Note that the welfare-exorbitant Scandinavian states also spend relatively high amounts on foreign aid per capita. #3, however, does suggest that the cost of helping the truly deserving is much higher than we had thought. Not only do we have to spend the money, but we must invest significant resources in bringing around our social consciences.
Addendum: Here is more from Alex.