Saturday, July 19, 2008

The entitlement crisis, again

Economist Tyler Cowen argues for means testing of Medicare:

Right now, the United States is in the midst of a financial crisis, but even more pressing problems may lie ahead - and the presidential candidates aren't addressing them.

No matter who sits in the Oval Office next year, there won't be many degrees of freedom in the federal budget. That's because spending on entitlement programs is largely locked into place, and the situation will become much worse as Americans age and health care costs rise. Even if the government is conservative in its spending, just paying out promised benefits implies that tax rates will rise to a crushing level - a range of 60 to 80 percent of income - well before the end of this century.
A certain blogger has raised these very points many, many times before: the government has made promises it simply cannot keep, yet we're reaching (reached?) a tipping point where so many voting Americans receive benefits that reform has become impossible.

Don't expect to hear much about targeted benefits anytime before November. Such proposals would acknowledge the painful but probably realistic notion that we don't have many good ways to control health care costs.
In other words, don't just do something: stand there.

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