We propose that if you want to use heroic measures to keep yourself or any other Medicare or Medicaid recipient alive — we’ll leave it to experts to define “heroic measures” — either spend your own money or buy a supplemental end-of-life policy from the market that will doubtlessly spring up if our proposal is adopted.
We’d also surcharge smokers and the obese for their Medicare coverage. Since the U.S. Surgeon General’s report in 1964 linking cigarettes to lung cancer, people have known definitively that smoking is bad for your health. Continuing to smoke once you’ve started is often an addiction — but starting to smoke is a choice. Ditto for people who are grossly overweight, except for a handful of cases in which morbid obesity is caused by a medical condition.
(John Nickle/For The Washington Post)
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Social Security is a smaller problem but still a problem. We’d explicitly make Social Security a pay-as-you-go system and adjust it to work on that basis, wiping out the deceptive Social Security trust fund.
The fixes are simple and obvious: Bring in more money by slightly adjusting the payroll tax, and change the benefit formula to reduce benefit growth over time to the highest-income beneficiaries. Social Security tax is levied only on salary income up to $110,100 (while Medicare tax is levied on all salary income), and that wage base rises gradually over time. Let’s raise it a little faster while also edging up the retirement age to keep pace with increasing life expectancies. That would do it.
The $3 trillion Social Security trust fund, while impressive on paper, is of no economic value because the government has to sell new Treasury securities to raise the cash to buy the Treasury securities that the Social Security trust fund liquidates in order to meet its obligations. The bookkeeping is so complex and misleading that it causes some people to say the system is broke, which it isn’t, and others to say it’s flush, which it also isn’t.
In making Social Security explicitly pay-as-you-go and eliminating the trust fund, we’d allow a specified subsidy from general tax revenue to compensate current and future beneficiaries for the excess Social Security taxes they’ve paid since 1983, when Congress raised Social Security taxes and cut benefits. This isn’t an ideal solution, but it’s certainly preferable to today’s baffling whirl of Washington legerdemain. That subsidy would be phased out over 25 years or so, and we’ll then have a system that people can understand and have confidence in.
The largest element of spending after social insurance is defense. Its budget can and should be cut. Even a staunchly pro-military Republican such as former senator Alan Simpson (R-Wyo.) likes to point out that America’s defense budget, by far the world’s largest, is greater than the combined defense spending of the next 15 biggest defense spenders. For those in Washington freaked out by the possible mandatory defense cuts if the fiscal cliff actually happens, here’s a great opportunity to act like adults. In May the House of Representatives voted to give the Defense Department $3 billion more than it requested for 2013 (which was $519 billion). It’s time for members to think less about directing pork to their districts and more about the nation’s future.