South By North Strategies, Ltd.

In a recent column, economist James Galbraith laid out the consequences of  “the conventional wisdom” calling for reductions to Social Security and Medicare benefits and argues instead for expanding these social insurance programs.

Medicare pays doctors’ bills for the old. It pays out at lower rates than does private insurance for working people. Cutting Medicare would mean two things: less health care for the elderly, and therefore more financial stress on their families. And more health care costs overall, as people substitute with private insurance for the public cuts. Both of these are very bad ideas.
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Social Security pays to keep working people (and their dependents and survivors) out of poverty when they are old. It spreads its benefits to all who have worked, whether they have children who would otherwise support them or not. The payroll tax spreads the burden to all working people, whether they would otherwise be supporting elderly parents or not. Both of these transfers are fair, modest, and sustainable. Cutting Social Security would simply create more poor elderly—those who could not turn to their children—and more stressed working families—those with parents in need. Both of these are very also bad ideas.

Galbraith continues:

In fact, the right response to the crisis is to expand, not cut, both Social Security and Medicare.
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The reality is, we are never going to make up good new jobs for everyone who has been hit…. So let’s face reality, and make some tough decisions about who we want to be jobless: the relatively old or the very young. Seen this way, it’s an easy choice.

In the end, he argues,the choice comes down to a question of values.

Encouraging early retirements would mean that young people—just out of school, with fresh skills, good health, and high energy—would get the jobs they need now. They would not be stuck waiting, or spinning their wheels in school, for years and years. Meanwhile, the retirees, supported by Social Security and Medicare, would provide a continuing stable support to total demand, creating jobs for others as they get older.
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This is the way the economy should work. When we have older people, we must care for them, and the best way to do that is to give them the resources to support themselves. There is no “burden problem” as our economy is plenty productive for the working population to support the elderly in modest comfort, particularly if we include some of our truly wealthy in the tax base.