Medicare and Social Security: Fun with Numbers

Medicare and Social Security: Fun with Numbers. In a recent Thanksgiving column for the Washington Post, Catherine Rampell delved into the intricate web of Social Security and Medicare, shedding light on how these programs impact retirees and, by extension, future generations. The article posits that the debate around these benefits is often oversimplified and, in some cases, misrepresents the true dynamics at play.

Social Security Not as Generous as It Seems

The article begins by challenging the perception that Social Security is an undue burden on younger generations. Contrary to popular belief, even with the projected shortfall in a decade, Social Security doesn’t emerge as an exorbitant subsidy for retirees.

The calculations by economists Gene Steurele and Karen Smith indicate that for low and middle-wage earners, the benefits are slightly more than what they contribute in taxes. However, the gap narrows for higher-income earners and turns into a surplus, prompting questions about the fairness of potential benefit cuts for those who have paid more.

The Complexity of Calculations

The analysis dissects the calculations, emphasizing their stylized nature. The assumptions, such as a constant wage throughout one’s working years and a fixed interest rate, may not align with the real-life variations in income and career trajectories.

The article highlights the disparity in life expectancies between low and high earners, suggesting that benefits may be overstated for the former and understated for the latter.

Medicare: A Closer Look at Subsidies

Moving on to Medicare, the piece navigates through the larger subsidies it seemingly provides. However, it contends that the apparent generosity of Medicare is, in fact, a reflection of the inefficiencies in the U.S.

healthcare system. By comparing projected benefits to healthcare costs in other countries, particularly Canada, the article suggests that Medicare’s subsidies to retirees are, to a significant extent, a consequence of the inflated costs of healthcare services.

Government Role in Shaping Markets

The article takes a broader perspective, addressing the arbitrary nature of designated taxes for Social Security and Medicare. It argues that the government’s role in structuring markets plays a crucial part in determining winners and losers in various sectors, from healthcare to finance. The piece emphasizes the need to reconsider the focus on tax and transfer policies, calling for a more comprehensive examination of how the government shapes markets.

Conclusion

The Thanksgiving column challenges the conventional narrative surrounding Social Security and Medicare, urging readers to look beyond the surface-level debates.

It underscores the complexity of these programs, the inherent biases in calculations, and the broader issues of market structuring that often go unnoticed in discussions about subsidies and benefits.

As we contemplate the future, the article encourages a more nuanced and holistic approach to economic policies, recognizing the interconnectedness of various factors that shape our society, economy, and the well-being of future generations.