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Thursday, February 13, 2014

This is taken from a paper by Brad DeLong. And what is the number one issue of our time? Income distribution. Enjoy the beach because you ain't gonna be working in the future.

The urgency of a growth agenda is strengthened by the recognition that the United States' social insurance system was designed for the pre-1973 rapid rather than the post-1973 slow pace of growth.Without faster long-term economic growth America's social insurance system as we know it is unlikely to survive the next generation. Thus there is a sense in which the stakes at risk in the task of finding policies to spur American economic growth are larger for the left than for the right half of the political spectrum. All have an interest in faster economic growth: faster growth empowers the American people to better achieve their ends whether their ends are sitting on beaches sunning themselves, raising their children, protecting endangered species, or increasing their level of education.

But in the absence of faster economic growth than has been seen in the past two decades, the future of the social insurance state is easy to read: Medicare and Social Security devour the rest of the Great Society and the New Deal over the course of the next generation. Two generations hence Medicare and Social Security run up against their own budget constraints, and destroy themselves.


Jeffrey said...

Social Security and Medicare are not sustainable at any rate of growth. When Social Security was created the payouts started at what was then the average life expectancy. Both programs are a form of redistribution from the poor to the middle class and the rich. They are horrible and the nation as a whole would be better off without them.
Milton Friedman, in a video that I cannot find at the moment, explains that not only was there never any demand for S.S. but it actually had to be sold to the American people with propaganda and lies. The payments by employer and employee are both, in reality, borne by the the employee. On top of this, the poor go to work at a much earlier age than people who are considered middle class or who are wealthier, so they begin paying into S.S. earlier. They also are more likely to have to work beyond age 65, in which case they cannot collect benefits and are still required to continue paying for the very benefits they are not receiving. And when they do retire, because the poor actually have a lower life expectancy than other groups they are likely to collect less.

Randall Parker said...

Jeffrey: Not any rate of growth? You must work on your anger management. It is coming through in your writing style and it looks like you may be ready to throw a tantrum at any moment. This is not pretty. And remember this is a bash-free site so don't call people liars here. Remember, many thought Roosevelt lied us into WWII and I know that you know that is hooey.

Jeffrey said...

I am not angry at all; I just see no reason in beating around the bush on issues as clear cut as this. These programs are not sustainable in their current forms at "any" rate of growth, because economic prosperity has throughout history meant that people will live longer and they will have fewer children. So if the economy grows and technology continues to improve there is no way these programs will last without serious modification. This is not new information; I don’t know anyone who says they are sustainable programs. Now if you want to tie Social Security payouts to the average life expectancy then maybe it will be sustainable for a much longer period of time, but then you will have created an incentive for politicians to manipulate life expectancy numbers for votes and the country as a whole would still have to bare the burden of a regressive tax. We can either let our social programs swallow us up or we can be adults and face facts. Seeing how social programs breed dependence we can be sure it will never get any easier to eliminate them, and why would we want to keep them? It is very clear that the programs hurt the people they are supposed to help. I mean think about what has happened. The government passed a minimum wage law forcing businesses to discriminate against unskilled workers. They created Social Security which lowers the pay of the still employed low skilled workers and then they created Welfare to help those who they just put out of work and to help relieve the Social Security burden for some of the ones still working. All the while they are taxing production and slowing our rate of economic growth and improvements in standard of living for everyone.

Here are Milton Friedman’s exact words on the subject.
“There was no public demand for it, it had to be sold. How was it sold? By the slickest devices of Madison Ave. By imaginative packaging and deceptive labeling. Social Security was sold as an insurance scheme. It is not an insurance scheme. There is very little relationship to the amount of money any one individual pays and the amount of money he receives. Social Security is a combination of a bad tax system with a bad way of distributing welfare. It’s got two components and I have never known anybody, whatever his political persuasion that would defend either component separately.”

“One of the things that always shocks me is how people whom I would trust, maybe not with my wife, but certainly with my pocketbook in their private capacity – whom I would never question the integrity of – will in their public capacity, because they believe it’s in the best interest of other people, LIE to the American people.”

Are you suggesting that the truth is not PC enough for your blog? Do you honestly believe that the politicians selling the same sorts of social programs today are not lying when they say the programs will reduce costs? Do you think they honestly believe that levying multi-billion dollar fees on the health insurance industry, medical device manufacturers, and healthcare providers, all while piling on unfunded mandates and regulations in a 2700 page bill will lower the costs that you and I have to pay for healthcare and insurance, or do they have another objective entirely? I mean, look at the possibilities, they are either lying or they are horribly ignorant bordering on stupid, both are insulting, but one of them has got to be the truth. And in all reality it is an unholy alliance between the liars and the ignorant because there are some of both.

Randall Parker said...

Jeffrey: Not any rate of growth? Only decaf coffee for you from now on.

derekp said...

"They created Social Security which lowers the pay of the still employed low skilled workers"

The Earned Income Tax Credit addresses this issue and more or less rebates back any payroll taxes subtrated from the low income employee.

Social Security also forces people to save some $ for retirement. Without this forced savings many people would have zero when they become elderly.

My expirience as a manager of 401k plans has shown me that most people on the lower and middle side of the pay scale are unwilling to save anything for the future. Is Soc Sec broken? Yes. If the government would manage this program like all other pension funds are mangaged it would not take much growth at all to whip it back into shape.

Ashton said...

I understand that the Articles of Confederation may of had some design flaws. Nevertheless, the thought that Congress had only the authority to "request" revenue (not to mention troops!) from the States in order to raise funds, whereby the States could then either accept or reject a request, is quite comforting, albeit ephemeral.

Also, Congress under the AF would need unanimous consent from all representatives of state legislatures to implement any of their decisions. How sweet and soothing to flaunt the demand for a necessary supermajority in Congress to pass legislation, let alone unanimous consent!