Wednesday, August 4, 2010

Tide Goes In, Tide Goes Out

James Kwak is talking sense about Medicare:

[P]roposals to solve the long-term budget deficit problem by cutting Medicare benefits are not solutions: they simply shift the problem from the government to individuals–which means they shift the problem from us as taxpayers to us as old people or us as family members of old people. If, for example, we increase the eligibility age for Medicare from 65 to 67, the government saves money, but only because people who are 65 and 66 lose money–or, alternatively, all of us lose money because their employers now have to pay more for health care.
Exactly. A roughly parallel observation holds for all the tireless bleating that declining worker-to-retiree ratios necessitate rollbacks in the Social Security program

If the ratio of productively, actively-wealth-creating people (workers) to non-productive people (retirees) is a problem for a tax-funded retirement program, there's no obvious reason why it is not a problem for privately-funded retirement schemes.

As glibertarians themselves are fond of pointing out when they're not in a snit demanding a free lunch, there is no free lunch. Money grows as a result of people doing productive things now, or on bets placed that they will do so in the future -- as Lane Price said in the most recent episode of Mad Men, "there is a very real system of money coming in and money going out."

If too many people are sitting around waiting for checks to arrive while watching re-runs of Mama's Family and shaking their fists at passing cars, and too few people delivering mail, making new episodes of crappy tee-vee shows, and manufacturing cars, the system can't hang together. There is no enchanted dust sprinkled around Wall Street that shields the private sector from this reality.

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