The Chicago Sun Times reports,
Life expectancy for Americans by 2050 will surpass government projections by as much as eight additional years for women and five for men,
This is good news. The trend is not just for death to be pushed back, but for the infirmities of old age to be pushed back. The additional years are likely to be quality years, rather than additional years in the old age home.
Of course, it has horrid implications for Social Security, with its fixed retirement age. People will be collecting benefits much longer.
There are two reforms that must take place in order to fix the long-term U.S. Budget outlook.
1. Social Security benefits have to be indexed to longevity. That is, the age of eligibility should rise about 3 months per year, which is the average rate of increase in longevity. It needs to be increased faster if we get better at extending life.
2. Medicare needs to be converted to a voucher, rather than a reimbursement system. That way, the growth in spending becomes controllable and finite, rather than the opposite.
Relative to these two ideas, every other fiscal reform I have seen discussed falls far short of solving the problem.
READER COMMENTS
Arthur_500
Dec 14 2009 at 6:05pm
As the population ages there is every indication, at this time, that dementia will increase. Just because we are living longer does not mean we are living better. As all these numbers are plotted and projected into the future we need to recognize that so much of our healthcare dollars will be spent maintaining the lives of individuals who have alzheimer’s or some similar malady.
We have known for some time that medicare and social security are broken. Our politicians have added all sorts of additional users yet fees have remained the same. Couple this with an all-out assault on the accounting for company medical and retirement plans and we have a society dependent on the Government for their healthcare and retirement.
If the younger generation(s) vote for a voucher system that cuts off funding for the elderly we will ipso facto have the infamous ‘death panels.’ and I think that will be the third rail of politics.
The alternative is to double our payroll and income taxes. If Europe is any example, the American politicians will vote for higher taxes and the public will cry in their beer and acquiese. The only alternative is to be sensible and we aren’t about to start that now.
Les
Dec 14 2009 at 6:43pm
Before we celebrate the increased longevity projections, shouldn’t we investigate their reliability?
Arnold’s two suggested reforms make sense, even if the projections of future longevity are not reliable.
But would it not be even better to privatize Medicare?
dWj
Dec 14 2009 at 6:45pm
I have seen poll data suggesting that people are more amenable to benefit cuts in Social Security than to age increases, which seems bizarre to me, but is easily accommodated if you increase the spread in ages over which one can choose to start taking benefits. Those of us who would rather wait can wait, those who would rather take a smaller payout can do that.
david
Dec 14 2009 at 6:57pm
Singapore has been raising the retirement age (55 to 60 to 62) and has plans to raise it steadily to 65, 67, and then 70.
The amount of discontent this generated is astonishing (you’ve planned your next ten years on that acquiring that savings-account moolah next year? Well, wait another four years!). Singapore can ignore such concerns, but I can’t really see it flying in the US. Not unless it does become a totalitarian progressive dictatorship. 😉
bgc
Dec 15 2009 at 1:08am
Yes, but where are the opportunities for wholesale bribery, graft and a federal power grab?
Jim
Dec 15 2009 at 1:42am
Our $75T liability demands more structural changes than suggested if we are to avoid eventual ruin. At some point the world’s economies will grow to the point where they can ditch the dollar, releasing them from the current MAD situation they are in.
Ryan Vann
Dec 15 2009 at 9:08am
Wait, the life expectancy trend is up; I was under the impression American healthcare resulted in squalor and brutally short lives? Surely, this can’t be right.
strainer
Dec 15 2009 at 2:15pm
In my view the programs and policies put in place by the US government (and other governments that have followed in their footsteps) in their attempts to “improve” the economy are extremely irresponsible and wreckless. They have used terrible Keynesian policies and wasted trillions of dollars bailing out creditors and shareholders of failed institutions with broken business models rather than addressing the structural flaws in the system of too much debt. And these actions are going to lead to big problems down the road with regard to our currency and interest rates, in my opinion. Furthermore, I think that the gold price breaking out to a new high is a strong indication of the reduction in faith and confidence that people have in governments and their fiat currencies. I recently read a good article called Gold Price Wobbles Under $1,130 But U.S. Dollar Future Bleak at that discusses the Federal Reserve’s easy monetary policies in order to try to prevent any sort of deflation from occurring and to try to reflate assets prices. There are also many more articles here that I think are very helpful for any investor to read because they help to explain the investment implications for the dollar, the gold price, and gold mining companies who I believe will continue to benefit from central banks’ inflationary programs.
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