There are at least two possible reactions to the realization that a lot of your Federal taxes transfer money from the young to the old (Medicare, Social Security, etc.). One is to argue that this is unjust and try to cut these programs. Another is argue that this is unjust, and therefore to expand them: eliminate the injustice by making the benefit available to everyone. Expand Medicare to everyone. Make Social Security available to people 50 and older. After all, we’re a more prosperous country than we were when Social Security was passed; shouldn’t we reward ourselves for our productivity by providing official support for greater leisure?
It seems like people (e.g., “the execrable Robert J. Samuelson”) only ever take the first option: we must cut Social Security. But why? We’re wealthier than we’ve ever been! (That’s disposable personal income per capita, where disposable personal income is defined as personal income minus taxes. Personal income, in turn, is what you’d expect.) Social Security is an unjust transfer? Sure it is! So make it more just and let more people have it; problem solved.
As it happens, the government has been keeping close watch over productivity statistics since after World War II. If I’m looking at the right data series, and I think I am, aggregate productivity — that is, output per hour of labor — is 4.6 times what it was just after the war. The miracle of compounding, brothers and sisters! Imagine if we as a society had made the decision to take half of that productivity and plow it into our own leisure at the end of a lifetime of hard work. We’d still have the standard of living of postwar America — the most prosperous time this country has ever known. We’d just be able to enjoy more of it.
I’m sure I’m missing important pieces here. For instance, maybe Social Security does now indeed consume twice as much of every person’s paycheck as it did back then; maybe we’ve quite kept up with the productivity gains. Chart A in a summary of the latest Trustees’ Report, for what it’s worth, says that even in their fevered dreams, the actuaries can’t conceive of Social Security consuming more than about 6.5% of GDP.
You could certainly continue working past age 50 under this idea. By all means! You can continue working under the current system. Some people will choose not to, however. And I’m sure the hardworking Social Security actuaries have plenty of good estimates of the benefit level that would induce x many millions of people to drop out of the workforce.
Not that Social Security is any kind of panacea. It pays out an average of $1,230 per month. Even with that meager payout, Social Security constitutes the majority of retirement income for the poorest 60% of retirees; retirees are poor. Social Security is a way to keep people out of poverty; it’s not a retirement with dignity.
Likewise with Medicare: despite liberals’ love for the program, and our desire that everyone be allowed to buy into it, it’s by no means salvation. Marilyn Moon goes into great and fascinating detail about this in her Medicare: A Policy Primer, of which I desperately need to write a review. Moon’s take, which is woefully rare, is to look at Medicare from the perspective of the beneficiaries; too often we look at it only from the perspective of the Federal budget. From the beneficiaries’ perspective, Medicare is a den of complexity. It’s not the single-payer health-care system of our dreams, and it leaves too many retieees (who are, again, by no means wealthy) paying a significant portion of their disposable income toward medical care. In the single-payer system that I think most liberals imagine, you’d pay some amount in taxes, and that would be that. No one expects me to pay a Department of Defense co-pay if the country gets invaded: my taxes are supposed to do the job on their own.
Decades of bludgeoning by the Republican Party has left us with the mistaken impression that we’re a poor country, and that the only thing we can do is cut cut cut. We’re not; we’re an astoundingly wealthy country. What is that wealth buying us? (Well, other than $1.121 trillion to fly money to the Middle East, drop it out of planes, and blow it up.) Wealthy societies should be willing to spend more on health care: a year of life is worth more to us than a year of life in a poorer country — indeed, worth more to us than a year of life to our relatively impoverished 1960s selves. (That’s the fundamental argument underneath David Cutler’s excellent Your Money Or Your Life, which I’ll review soon if I know what’s good for me.)
Wealthy societies should also, at some point, decide whether to convert some of their hard-won gains into leisure. We never seem to have had that discussion. Even opening up this discussion in “libertarian”-friendly ways — like allowing people to contribute money to their Social Security now to buy themselves extra retirement income — would be a worthwhile place to start.
Instead all our discussions are of a crabbed and nervous and desiccated sort. We act as though we’re a poor country. Every politician likes to say that he opposes the story of U.S. decline, but this incessant poverty drumbeat says quite the opposite.