• The pro-Medicare case for Medicare reform

    Ezra Klein’s recent column is titled “The pro-Social Security case for Social Security reform.” It includes the following paragraph:

    Too often, however, the folks most resistant to reforming Social Security are also those most committed to its mission. Many of the program’s defenders are so concerned that conservatives will slash benefits — now or down the road — that they are afraid to open the pension plan to any reforms at all. I think they’re wrong. This country is better than that. A political party that tries to tell ordinary Americans their retirements are too secure and too long will quickly learn its lesson when the election rolls around. Poll after poll shows the vast unpopularity of cutting Social Security benefits, and Republicans can read those surveys as easily as Democrats can. A politician may as well burn a flag on the Capitol’s lawn.

    Change “Social Security” to “Medicare” and the logic is the same. Yet every time someone suggests changes to either program it isn’t long before someone else trashes it in the name of protecting it from benefits cuts. It’s not necessarily an incorrect argument, not always. But if one is serious about preserving either program it can’t be an argument always and forever about every possible reform. If it is, it is essentially an argument for no reform. And no reform itself guarantees benefits cuts (see Don’s graphs).

    Fundamentally, we can’t afford to continue Medicare or Social Security as we know them. Something must be done. By default and necessity, something will be done. Do you want to bet that it won’t involve some cuts to benefits if we wait until the crisis is upon us? Those who wish to preserve some minimal degree of economic security in retirement should begin to embrace some element of change. The sooner they do so the better.

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    • Yes it seems even reforms that most anyone who studies the program would approve get trashed because the median voter is rationally ignorant and so wants no change of programs that he likes.

    • Whatever reforms are suggested, there is one reform that must be made: that is to discontinue the ability of the Treasury to withdraw the surplus FICA dollars to fund current expenses and (artificially) lower the deficits.
      In addition, the interest must be paid in cash, not Treasury debt.
      The entire trust fund is phantom, for to tap it, is the same way we pay for all government expenses – through current revenues and debt. I don’t know what the answer is to generate interest and or growth on those surplus FICA without benefiting certain private employers, but someone should be able to come up with the mechanism to do so.
      Don Levit

      • If you want to end the ability of politicians to use FICA dollars for other purposes, then the only way to do that is to put everyone’s name on a personal account. Investment choices would have to be tightly controlled, but if we all owned our own accounts, and got a statement every year showing our balance, Social Security would effectively be de-politicized. In addition, Congress would lose the ability to cut benefits. It is beyond me why leftists can’t see this and embrace it.

    • But the real problem is medicare and health care costs.

      Putting social security first is a little like bemoaning the budget excesses and cutting insignificant programs that have little effect on total spending–while maintaining larger budget items (farm support, oil depletion allowances, beneficial taxing of businesses etc) and cutting taxes for the wealthiest citizens.

      It makes no sense.

    • Paul:
      You are correct that Medicare is a bigger problem.
      However, the mechanics of the trust fund is the same as that for Social Security.
      In fact, there are around 20 trust funds that use the same lending of surpluses to the Treasury technique.
      One of those trust funds is for federal retirees.
      The entire trust fund is nothing other than an ability to draw on the Treasury, just like we pay any other government expenses.
      And, federal employees’ retirement payments are listed as liabilities on the balance sheet, over $5 trillion!
      The only way that $5 trillion can be paid is either by cutting expenses, raising revenues, or borrowing from the public,
      As long as we continue running deficits, I’ll choose borrowing from the public!
      Don Levit