In the ongoing debate about the federal budget, there are frequent demands for cuts in entitlements. Ironically, most of those demands come from politicians on the right, while the biggest objections to cuts in Social Security and Medicare typically come from older voters, who on average are to the right of the electorate as a whole.
Today, Ezra Klein — in another great post at the Washington Post’s Wonkblog, must reading for anyone following the links between politics and economics — responds to criticism after a recent commentary in which he suggested that seniors are getting more in benefits than they pay into the entitlement programs and that those “mandatory” benefits will “squeeze out” other worthy spending.
Few seniors have actually paid for their Medicare benefits. According to an Urban Institute estimate, the typical retired couple paid $122,000 in lifetime Medicare taxes but can expect to receive benefits worth $387,000. Social Security is another story. There, the average retired couple paid $600,000 in lifetime taxes for $579,000 in benefits. Put together, it’s $722,000 in taxes for $966,000 in benefits. (All figures are adjusted for inflation.)[...]
There’s nothing unusual about Social Security and Medicare in this respect. We all pay into most everything the government does, and we’re all paying less than we’re ultimately receiving. That’s why there’s a large and persistent deficit.[...]
The point here isn’t that seniors don’t deserve their benefits, or have done something wrong. It’s that the structure and politics of the federal budget right now are leading to a situation in which spending on retirees and keeping taxes low on current workers could really shortchange needed investments in our future.
For now, Social Security is not nearly as big a problem as Medicare, but, going forward, we will need to either cut benefits or increase revenues to support both as we have in the past. There are some straightforward ways to tackle the future shortfalls, a couple of which are mentioned in the post, including raising the cap on the income subjected to payroll taxes, means testing to some degree, raising the edge of full eligibility, and asking for larger co-payments or premiums for wealthier Medicare recipients.
It’s not rocket science. But if the relatively simple math is beyond the ken of those who think seniors have all paid enough into the system to cover their current benefits, then it might as well be rocket science.