Friday, January 19, 2007

Federal Reserve Chairman warns on Social Security, Medicare

The new Federal Reserve chairman Ben Bernanke warned that federal deficits associated with social security and Medicare costs would eventually undermine the economy, and that more drastic steps should have started ten years ago or so.

Greenspan would be alarmist to the markets in the past, but these remarks don't seemed to have surprised anyone.

Nevertheless, social security would face hard choices: increased taxes, means testing, reduced benefits, raised retirements ages -- and even some of this would be necessary if the country gradually migrated to a system of portable private accounts that people control on their own, since the system started with workers who had not contributed.

Medicare faces choices as people can be kept alive longer and longer (with a lower population), and some ethicists want to eliminate certain life-prolonging treatments over a certain age. Ultimately, some treatments could depend on the sacrifice of other family members, with some policy choices. There are profound consequences for the eldercare debate. The emotional nature of family cohesion can certainly undergo change, as it has been doing for decades. In earlier decades, people lived a "natural" life span at home, and often unmarried family members were expected to take care of them.

Thursday, January 18, 2007

Barbara B. Kennelly, National Committee to Preserve Social Security and Medicare

I received a large package from Barbara B. Kennelly of the National Committee to Preserve Social Security and Medicare, around January 17, 2007. While I will discuss the lobbying that goes with this issue on a different blog, I just wanted so summarize a few points that she made here about her groups accomplishments:

(1) The most interesting accomplishment is eliminating the Social Security earnings test for those having reached full retirement age (not for those in early retirement). I was not aware that in the past, even those at full retirement had faced earnings tests. Yet some people who see Social Security as an "old age welfare" program (rather than as an annuity) would maintain that means testing ought to continue.

(2) Heading off a balanced budget constitutional amendment that would have reduced social security benefits

(3) Heading off an attempt to reduce Social Security COLA benefits

(4) Stopping a proposal to reduce Medicare spending by $270 Million a year.

Of course, the ideological issue is partially replacing social security with private accounts, which would reduce contributions to pay claims for persons already under the old system, which became, in a sense, a Ponzi scheme because the first beneficiaries back in FDR days had contributed nothing. And the other issue is demographics--lower birthrates and longer life spans. Those are being discussed in other postings.

Here is a related posting by me on these kinds of lobbying practices.