Friday, April 1, 2011

Medicare and Social Security

Here are the brutal facts for you knee-jerk populists. The reason why health care costs are skyrocketing way beyond the inflation rate is because the government is subsidizing the health care industry on the demand side by huge amounts year after year, and Medicare is the biggest source of this demand side subsidization. As a result of this, affordable health care is being pushed away for more people than those that are being helped. There are two ways to fix this that anyone who didn't sleep through econ 101 can tell you. The first is to gradually, but significantly, decrease the demand side subsidization. This would bring the supply-demand balance closer to normal. The second, but the worse of the two options, is to shift the subsidization from the demand side to the supply side like how the agriculture industry is being subsidized. This has its own problems shown by the agriculture industry, but it does result in lower prices for the consumers.
As for Social Security, since it was never fully funded from conception, it was never designed to handle huge demographic shifts like the upcoming retirement of the bulk of the baby boomers. There will be far more people getting distributions than those paying into the pool, and it will last for decades. You aren't even beginning to imagine the impact if you think that Social Security can be tweaked to handle this. Again, there are two solutions. The first is to gradually phase Social Security out. Those who rely on it now need to still receive money from the those unfortunately won't receive any Social Security benefits until they die off. The second is to make Social Security truly fully funded. This means the government will have to infuse the social security fund with all the actual money people have paid in Social Security taxes. This will make the fund independent of demographic shifts because the money you pay into it is actually yours. This is the least desirable of the two because the amount required to fully fund the Social Security fund is phenomenal, and do you honestly trust the politicians to not touch such a fund?

1 comment:

Jeni Smiles said...

That's right, the politicians have stolen the money. And they steal it for their political backers, corporations.