Social Security prediction

Here is a related Paul Krugman post.  In my view, Obama may propose slowing the rate of benefit increase, but he won't propose an actual cut in Social Security benefits.  Use of the word "cuts" is thus likely to prove misleading.  I've already argued it is better to cut Medicare than Social Security (in-kind vs. cash), but it shouldn't come as a shock if reindexing benefits is part of a bipartisan budget deal.  It's an easier policy "to do" than fixing Medicare, though again I prefer the latter.

It's a common argument that we need not cut benefits now, simply to prevent benefit cuts in the future.  The reality is that the long-term budget (don't look at SS alone) is way out of whack, and reindexing now is one way to get larger spending cuts in the future than could be done on a one-time basis.  Unless you do reindexing of something, at some point in time, it is very very hard to institute large spending cuts on a dime.

Reindexing is one signal of a longer-term political time horizon.

Comments

I have a credit in the Australian Social Security fund, but I understand that they'll never pay me any sort of old age pension because they means-test it. Swine!

"it is better to cut Medicare than Social Security (in-kind vs. cash)"

If Medicare was providing e.g. food, that would make sense - give them the cash and they will choose how to spend it. But what Medicare is providing is insurance, which old people cannot buy on an individual basis for adverse selection reasons.

The reality is that the long-term budget (don't look at SS alone) is way out of whack

The problem is that, if, precisely, you look at SS alone, it is not "out of whack" the least bit. There are two ways for the trust fund to evolve: run a deficit ultimately, or run a surplus forever. In both cases someone will scream bloody murder....

"On the other hand we have compulsory saving in retirement funds (called superannuation funds). That is based entirely on what you put in like a 401k if a defined contribution version or on your final salary if a defined benefit fund."

Any resources you could point me towards for expating to your find island?

Why not introduce more market forces? Kill medicare and medicaid. Kill social security. Institute a $15000 tax credit for every citizen and tax filer (that includes working permanent residents). That will be enough to support each individual at above poverty level. People will also purchase essentials and medical insurance with that sum. It's more bureaucratically efficient than separate programs. This can essentially replace food stamps, medicare, medicaid, SS, and unemployment insurance all in one.

"Not taking it away, just putting it over here where you can see it." *palm*

How can an accounting fiction "evolve"?

Sum of taxes, interests, etc, paid into SS - sum of benefits paid by it = balance of the "trust fund". Ok, in practice it is just an accounting line, but what it means is that the financing of benefits through (past) payroll taxes will work for 30 more years or so. A crisis may not be the best time to have a rational discussion about this. Nor about the budget, for that matter.

Agree with Mulp.

SS is not the issue. Medicare is, and ultimately, the solution involves costs controls of some type--either through competitive voucher mechanisms (pool which vendors bid to serve) and/or caps at end of life events. (My favorite cap being that everyone pays their own last six months of medical care, meaning that an "estate tax" equal to the last six months of medical care is assessed against any size estate, subject to spousal exclusion.) This way the kids, the beneficiaries of an estate, have an interest in not ordering futile care as they have some skin in the game, so to speak.

Or just raise taxes on the people who have stolen/earned way too much over the last decade. This includes most of Washington, Wall Street, the defense industry and the wealthy in general. There is no particular crime to punish, the only evidence needed is high income. Those lucky duckies can pay 91% marginal rates and it isn't going to hurt them at all. And in return for not grabbing their current assets through personal property taxes, we wait till they don't need it anymore and get it from their estate.

We need a marginal revolution.

Stop kidding yourselves. There are no 'procedures that don't work.' We already don't do those. There is cost/benefit, and you want a panel to decide who lives and dies. But a panel can't know the specifics of an individual's cost/benefit ratio. So, your panel is going to set forth rules discriminating based on age and health. That's all. If you don't want to call them death panels, that's okay.

@David Stern: thanks for the advice about Australia - you clearly know more about it than I do. But I assure you that, more than 20 years ago, the Oz government gave me a little document that registered a "credit", or "entitlement", or something of the sort. My colleagues laughed and assured me I'd get nothing because of the means testing. The conclusion remains the same - I had (I assume) paid something in and I wasn't going to get anything out. (Happily I did get my private superannuation contributions back when I left the country for a few years and I didn't pay any more when I returned there briefly.) Anyway, my point to Marginal Revolution was of course that there exists a perfectly respectable country where Old Age Pension/Superannuation/Social Security is means tested.

I do hope that Krugman will be driving 120mph towards a brick wall some day, and his wife will ask him to stop the car, and he'll reply: "You want me to stop the car NOW, just to prevent a possible stoppage LATER?!? That's completely illogical."

You don't borrow to pay negative return, day-to-day, recurring, ongoing expenses. It's that simple.

Obama may or may not cut anything. But eventually math is going to.

"...It's an easier policy "to do" ..." Yes, and it was:
......an easier policy "to do" too small a stimulus;
.....an easier policy "to do" to not support the public option;
...an easier policy "to do" to extend all the tax cuts;

As long as we continue to do what is easy to do we will never learn the limits of what is really possible.

lff

"What's needed is something like the British National Institute for Health and Clinical Excellence (NICE)"

"That's what we said, death panels."

How could this be a death panel if the patient is still allowed to have the treatment as long as the patient pays? Indeed, you could have supra insurance to pay for questionable treatments not paid for by Medicare.

As for questionable treatments, there is one study that suggest that heart stent placement is a big waste of money with the one exception for those with an active heart attack. Yet Medicare continues to pay a few billion a year for stent placement.

For the record , I happen to favor the HSA/High Deductible approach.

What's really needed is legalizing HSA/High Deductible and leave people like me the hell alone so we can solve the problems you created for you.

Why are you bitching about legalizing HSA/High Deductible when they are already legal.

And failing to deliver the cost containment you claimed they would.

Or are you calling for a government takeover of the entire health care system and mandating everyone be forced into HSA/High Deductible??

What is the number of uninsured who have HSA/High Deductible insurance already? 50 million?? Whatever they can save and spend on health care is pretty much tax free, and they have high deductibles of their entire net worth, their incomes, plus whatever charity care is provided, and bankruptcy is what insures the remainder of their health bills.

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