Strange Comment on Social Security
By Arnold Kling
As a mental exercise, imagine if we eliminate SS spending and the SS payroll tax – what happens? The General Fund deficit stays exactly the same and we would need to address the significant General Fund shortfall. Would Kling then suggest raising taxes on lower and middle income Americans to cover the shortfall? That seems to be Kling’s suggestion.
I do not understand this. If we permanently shut down SS–no more spending and no more payroll taxes, then in the short run the government runs a larger deficit. But in a few years, as the Baby Boomers hit retirement, the hypothetical shutdown of Social Security will lead to lower deficits than otherwise. Overall, the effect of a shutdown would be to reduce the net present value of future shortfalls, so if anything such a shutdown would allow us to afford further cuts in taxes.
I am not sure what this thought experiment is supposed to prove, in any case. But if I understand the experiment correctly, then CR’s analysis of it is 180 degrees wrong.
Along the way, CR tells us he has a free lunch for us–reform of the health care system that will lead to lower costs and better outcomes. I have spent considerable time investigating such free lunch claims for my forthcoming book, and I am quite convinced that they are bogus.
Briefly, if you were to enlarge government’s role in paying for health care without introducing heavy-handed rationing, then spending will go up. (Medicare and Medicaid alone account for as much spending per capita as some other advanced countries’ entire health systems–just imagine what our spending would look like if all of us had our health care all paid for by Uncle Sam.) See also my latest essay.
You can reduce spending if you implement government rationing of health care. However, you have to be really brave to believe that by doing so you will improve health care outcomes.