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Entitlement Reform Delayed Is Entitlement Reform Denied

Social secruity

The longer entitlement reform is delayed the worse entitlement reform will be. Indeed, delay increases the risk of no substantial reform and much higher taxes for supporting Social Security and Medicare.  As time passes and more baby boomers retire, the amount of money paid out for age-tested entitlements will grow, making the programs even less solvent. Even more importantly,  the larger number of recipients and those close to eligibility will form a voting block against decreasing benefits. People fight very hard, sometimes even irrationally, to hold what is theirs. I am getting closer to eligibility myself and while I am ideologically committed to reform, I sometimes feel the tug of my own interests in policy analysis.

And the elderly form a particularly powerful voting block.  It is costly to vote and thus the elderly vote in larger numbers than the young.  They have less exciting things to do than the young and more time on their hands.

But most of the best reforms to Social Security and Medicare would affect those already collecting these entitlements or those within hailing distance of retirement.The most obvious reform is changing to a “chained” Consumer Price Index as a more accurate measure of inflation—a recommendation contemplated even by President Obama. The unchained version now in use overstates inflation, because it does not recognize that consumers naturally switch from products that go up in price  to other products, making them better off than they would have been if they continued to buy the same basket of goods. Changing this metric might knock inflation down by about a quarter of a percent a year. This revision may not sound like much, but it would compound over time and help make the programs more actuarially sound.  Even this reform may not go far enough, because, as I have previously discussed, the consumer price index does not count quality improvements sufficiently, also resulting in the overstatement of inflation.  But however justified such changes would be, those already on social security can be counted on to oppose them.

Increasing the retirement age also makes sense, perhaps prorated by the income levels of retirees so that that the poor could retire earlier than the rich on full benefit. People are living longer and healthier and that is no reason for government to provide even more benefits to those who are more fortunate than ever. But anyone thinking of retiring in the next decade or two is unlikely to be persuaded by such statistics.

Time and inertia is thus on the side of those who want to expand the weight of the state. If  President Trump does succeed in creating better economic growth, any resulting era of good feeling may be our last chance of avoiding a gerontocracy.

Reader Discussion

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on May 08, 2017 at 10:19:19 am

Donald Trump on entitlement reform:

We've got Social Security that's going to be destroyed if somebody like me doesn't bring money into the country. All these other people want to cut the hell out of it. I'm not going to cut it at all; I'm going to bring money in, and we're going to save it.
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Save Medicare, Medicaid and Social Security without cuts. Have to do it.

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nobody.really
on May 08, 2017 at 10:56:48 am

Perhaps Trump’s message is not surprising, given his populist outlook. According to the Pew Research Canter:

[M]ajorities of Democrats (79%), independents (66%) and Republicans (62%) say it is more important to continue current spending levels for Social Security and Medicare than to take steps to reduce the budget deficit.

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[T]he youngest Americans (ages 18-29) prioritize maintaining Social Security and Medicare benefits over deficit reduction by a 61%-30%; among the oldest segment of the public, those ages 65 and older, 78% say it is more important to maintain benefits, while 14% say it is more important to reduce the deficit.

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Majorities in all income categories say it is more important to keep Social Security and Medicare spending at current levels than to take steps to reduce the deficit. Those earning less than $30,000 a year say this by the most one-sided margin (78%-18%).

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nobody.really
on May 08, 2017 at 12:02:00 pm

If you want to reform domestic entitlements you first have to reform defense spending and stop subsidizing the defense of our first world "partners" in the EU, the Middle East (Israel and Saudi Arabia) and in East Asia (Korea, Japan and Taiwan). The government simply cannot beggar its own citizens without first reforming bloated defense spending.

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EK
on May 08, 2017 at 12:55:52 pm

Hey McGinnis!!!!

What the heck do you mean? - "Old folks don't have as many interesting things to do?

Hey man, that must be ageist or sumpthin!

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gabe
on May 08, 2017 at 13:01:51 pm

All depends on what the questions were.

As they say, "He who defines the question, provides the answer(s).

However, even if the support stated by Pew is exaggerated, it is NOT surprising that some categories will insist upon continued full funding!

Heck, I would be Happy if Uncle did not take half of it back in taxes.

Even still, I support "controls" on the rate of growth in SS, etc.

But if you want to REALLY see financial chaos in retirement systems, wait until State Pensions come due.

Whoa, nellie! It's gonna be ugly!

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gabe
on May 08, 2017 at 17:15:40 pm

Social Security,Medicare,Medicaid and Obamacare are legally taxes and the money doled out to pay for them are legally benefits. There are no real "trust funds." The "cash funds" were swapped out and replaced with government IOUs in the form of government bonds printed up out of thin air that have to be paid for with future taxes. In essence its all a big Ponzi Scheme. The benefits can be ended at any time by the Congress and anyone who paid into these welfare schemes would receive zero in benefits. No one has any equitable interest at all in these programs. We can thank FDR,LBJ and Mr.Obama for these schemes.
With that said,because of political pressure,there is no doubt that these benefit programs will stay in place due to the Federal Governments ability to print money. However there is no doubting that the purchasing power of the inflated printing press "dollars" will buy a lot less then their current value and that the "healthcare" insurance quality will be greatly reduced. This is a classic example of "Ringo's Law." That is "anything the government touches eventually turns to sh-t."

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libertarian jerry
on August 28, 2018 at 23:53:03 pm

"Increasing the retirement age also makes sense, perhaps prorated by the income levels of retirees so that that the poor could retire earlier than the rich on full benefit. "

Work harder... and longer too... and pay higher rates of income and property tax.

Hardy a work incentive.

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Jesus Mybalzich

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.