Social spending

Arnold Kling's Four Myths About Social Security

My view has always been that the crux of the issue in Social Security and Medicare is the ratio of beneficiaries to taxpayers. The implications of this are:

1. Privatization is not a panacea. I think that privatization is a good idea, but the benefits from privatization will not be sufficient to rescue Social Security.
2. The retirement age is the most logical and effective policy lever. See Phase Out Medicare and the other essays in the last part of my book.

For the public, I recommend keeping in mind the main lessons of this essay. Social Security is a transfer scheme, not a pension plan. The economic effects of a transition to privatization would be subtle and small, probably beneficial, and certainly not catastrophic. The demographic problems with Social Security go well beyond the Baby Boom retirement bulge. Finally, the fact that Medicare's obligations are rising faster relative to Medicare's smaller tax rate does not imply that Social Security's imbalances are minor.

And in Phase Out Medicare, he writes,

With Republicans in control of Congress and the Presidency, this may be the last chance to change course in this country. If we continue on the path of socialized medicine, there is every reason to fear that the United States will fall into the debilitating, low-growth, over-taxed trap that has Europe and Japan in its grip.

If the Bush Administration is looking for a bold economic agenda, then the best choice would be to take steps to return health care to the private sector. The most effective way to do this would be to raise the Medicare eligibility age for everyone under the age of 50.