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We Don't Have a Spending Problem, We Have a Distribution Problem

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Sal

Sal

In this season of fiscal silliness, many people are saying that we cannot afford our current entitlement programs. They shake their heads solemnly and say that Social Security and Medicare were well-intentioned ideas, but we simply do not have the money to pay for them and there is no escaping the need for "structural changes."

Hogwash.

Yes, federal government spending on Social Security and particularly Medicare is projected to grow, as a share of the economy, over the next several decades. That's because our population is aging and health care is becoming more expensive. As a result, spending on entitlement programs is growing faster than tax revenues. This creates the perceived need to cut spending, most notably in Paul Ryan's plan to convert Medicare into a voucher program--whose vouchers are designed not to keep up with actual health insurance costs.

This kind of cost-cutting doesn't do Americans any good. Health care is something people need. If the government pays for less of it, then either seniors will pay for it directly, and we'll simply have shifted costs from taxpayers as a whole to the elderly--or seniors won't be able to afford it, and we'll have balanced our budget on their backs.

More fundamentally, it's a mistake to fixate on the federal government's budget and ignore the aggregate budget of the American people. The federal government exists to serve the American people, not the other way around. The real question is whether we as a society can afford our current level of entitlement spending.

The answer is obviously yes.

This chart shows real per capita GDP--the total value of all goods and services that we produce, divided by the population--as projected by the CBO. (The data are from the supplemental tables to the CBO's June Long-Term Budget Outlook.)

We Don't Have a Spending Problem, We Have a Distribution Problem Screen17

Because this is per capita GDP, it already takes into account the fact that a growing share of the population will be retired. And because it is real (inflation-adjusted) GDP, it already takes into account the fact that everything, including health care, is getting more expensive.

In other words, in the future, we will be able to afford all the health care we consume today, plus all the other stuff we consume today, and then some. That means that, for example, seniors can enjoy the same level of health benefits that they enjoy today, and the rest of us can still be better off than we are now. And it isn't even close. Forty years from now we will be, on average, twice as well-off as we are today.

The key words in that sentence are "on average." As a society, we will produce far more than enough goods and services to preserve Social Security and Medicare in their current form without making younger people worse off. But these programs will consume a growing share of total societal resources, and since they are administered by the federal government, that requires higher taxes.

So the real point isn't that we can't afford Social Security and Medicare. It's that some people don't want to pay the higher taxes necessary to maintain Social Security and Medicare. This is a question of distribution, pure and simple.

At first blush, it may appear that young people don't want to pay for retirement benefits and health care for old people. But most of us will be both young and old at different points in our lives, so we're on both sides of the transfer. The real issue is that Social Security and Medicare are risk-spreading programs, which means that rich people end up subsidizing poor people.

When people say that we can't afford our entitlement programs, they're really saying that rich people won't pay the taxes necessary to sustain our entitlement programs. To be fair, many rich people probably would be willing to pay higher taxes if they knew the facts. But a small number of extremely rich people have successfully spread the myth that we can't afford our entitlement programs.

Decades ago, Congress decided that anyone who worked for ten years, and his or her spouse, deserved a basic level of health insurance. If they deserved it then, there's no reason they won't deserve it in the future. And as a society, we can easily pay for it. The reason we're talking about cuts to Social Security and Medicare is that some very influential people don't want to pay for it--and they've convinced everyone else that we can't pay for it.

http://www.theatlantic.com/business/archive/2012/11/the-us-does-not-have-a-spending-problem-we-have-a-distribution-problem/265408/

It should be pointed out that between 1960 and 1980 when the full retirement age was 65, black men could theoretically qualify for benefits, but the average life expectancy of an African American male was roughly 62 years old. So Blacks would pay into the program their entire lives and die before they could take any substantive advantage.

Then in the 1980s, when Black male life expectancy had finally increased to 65, it was decided that entitlements needed an overhaul and the age of full retirement was raised to 67.

Finally, Black male life expectancy has nearly reached 70, and what a SHOCK that the Repukes would propose raising the age of Medicare eligibility to 70 ...

gulfbeachbandit

gulfbeachbandit

http://bossip.com/370669/11-african-americans-who-have-lived-to-be-over-100-years-old/#

Guest


Guest

We Don't Have a Spending Problem, We Have a Distribution Problem Images?q=tbn:ANd9GcTMgt_nzU1n2LbYYzNZr0BpGGt5ucknjjct2xLCKNEykVfke7yfnA

So they've continually cut the supposedly guaranteed veterans health benefits since the Viet Nam war ended because the government could afford to pay for those benefits.

*****SMILE****

https://www.youtube.com/watch?v=26EP0ght2kI

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