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Archive for the ‘Entitlements’ Category

I’ve responded to all sorts of arguments against lower taxes.

  • Tax cuts are “unfair” because rich people will benefit.
  • Tax cuts are wrong because revenue should be going up, not down.
  • Tax cuts are pointless because the economy won’t grow faster.
  • Tax cuts are misguided because there will be more red ink.
  • Tax cuts are risky because vital services would be unfunded.

But I’ve never had to deal with the argument that lower taxes are “dangerous.”

Yet that’s what Ruth Marcus of the Washington Post would like readers to believe. Here’s some of what she wrote today.

…tax cuts — not to mention tax cuts of the magnitude Trump and fellow Republicans contemplate — are worse than unwarranted. They are dangerous.

Dangerous?!?

Before clicking on the headline, my mind raced to imagine what she had in mind. Was she going to argue that lower taxes somehow might cause the nutjob in North Korea to launch a nuke? Was her argument that a tax cut would unleash the Ebola virus in the United States?

Well, you can put your mind at ease. The world isn’t coming to an end. It turns out that Ms. Marcus is simply making a rather hysterical version of the argument that tax cuts are bad because they result in more red ink.

They would add trillions to the national debt at a point when it is already dangerously large as a share of the economy. …the national debt is 77 percent of the economy, the highest since the end of World War II. It is on track to exceed the entire gross domestic product by 2033. That is even without a $1.5 trillion tax cut, the amount envisioned in the just-passed budget resolutions. …the nonpartisan Tax Policy Center found that increased growth would be counteracted within a few years by the drag of higher deficits; overall, the plan would increase deficits by $2.4 trillion during the first decade. …As an economic matter, they are simply reckless.

I’m actually semi-sympathetic to her argument. It isn’t prudent in the long run to reduce revenues and allow a continuing expansion in the burden of government spending. She would be right to hit Republicans for wanting to do the fun part of cutting taxes while ducking the politically difficult task of restraining spending.

That is a recipe for becoming another Greece. Not today. Not next year. Or even 10 years from now. The United States probably has the ability to stumble along for decades without doing anything to reform entitlements (the programs that are causing our long-term fiscal problems).

But I can’t resist making two points.

First, where was Ms. Marcus when Bush was pushing the TARP bailout through Congress? Where was she when Obama was advocating for his faux stimulus? Or the Obamacare boondoggle?

These pieces of legislation were hardly examples of fiscal rectitude, yet a search of her writings does not produce examples of her warning about the “dangerous” implications of more red ink.

Her selective concern about deficits makes me think that what she really wants is bigger government. So if the deficit is increasing because of new spending, that’s fine. But if red ink is increasing because of tax cuts, that’s “dangerous.”

If nothing else, Marcus may deserve membership in the left-wing hypocrisy club.

Second, if Ms. Marcus genuinely cares about deficits, then I’ll forgive her for her past hypocrisy and instead simply ask her to look at the Congressional Budget Office’s most recent long-run fiscal forecast.

She will see that more than 100 percent of America’s future fiscal crisis is due to expected increases in the burden of entitlement spending.

You may be wondering how something can cause more than 100 percent of a problem. Well, if you look closely at that long-run forecast (or previous forecasts), you will discover that tax revenues automatically are expected to increase. Not just in nominal terms. Not just after adjusting for inflation. Tax revenues will climb as a share of overall economic output. By about two percentage points over the next 30 years.

By the way, that built-in tax increase is bigger than the Trump/GOP tax cut, which will only reduce taxes over the next 10 years by $1.5 trillion out of an expected haul of $43 trillion.

Oh, by the way, I’ll add a third point. Advocates of higher taxes should be required to explain why more revenue for Washington will somehow lead to better results than what happened when such policies were adopted in Europe.

In other words, some of us don’t want to “feed the beast.”

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Imagine that we’re in a parallel universe and that you’re the lookout on the Titanic. But in this make-believe world, you have all sorts of fancy radar that allows you to detect icebergs with lots of advance notice. Furthermore, imagine that you detect danger and give lots of warning to the Captain and other officers.

How would you feel if they then decided to ignore your warnings and continued on their course to disaster? You’d probably tear your hair out in frustration.

And that’s a pretty good description of how I feel about the easy-to-predict, visible-to-the-naked-eye, baked-in-the-cake, bound-to-happen fiscal crisis that will occur because of the combination of demographic change and poorly designed entitlement programs.

It’s happening in the United States. It’s happening in Europe. It’s happening in Asia. Heck, this is a worldwide problem.

Simply stated, welfare states were created back when everyone assumed that there would always be a “population pyramid,” which means relatively few old people (who collect a lot of money from entitlement programs) at the top, plenty of workers (also known as taxpayers) in the middle, and lots of children (i.e., future taxpayers) at the bottom.

In that world, a modest-sized welfare state isn’t a good idea, but at least it is mathematically sustainable.

Today, by contrast, such a welfare state is a problem because we’re living longer and having fewer children.

And in the future, that kind of welfare state is a recipe for a Greek-style fiscal crisis because demographic trends will be even less favorable. To be blunt, there won’t be enough people pulling the wagon compared to the mass of people riding in the wagon.

At the risk of beating a dead horse, here’s some additional data on this global problem. We’ll start with this look at how the population pyramid is becoming a population cylinder. The key thing to notice is the growth of the over-65 cohort.

And here’s a different way of looking at the same data, but stretching out to 2100.

I didn’t add a red line at age 65, but it’s easy to see that the number of older people will dramatically increase without a concomitant increase in the number of working-age people who are expected to pay the taxes to finance pensions and health care.

So what’s all this mean? Here’s a sobering thought from Prospect.

The ageing populations of the advanced economies and the larger emerging ones combines with past falls in the birth rate to mean that the share of total world population who are of prime working age has been falling since 2012. After a four-decade rise, the trend has reversed with that fall projected to last throughout the 2020s, 2030s and 2040s. A slower-growing global workforce will be a big challenge for the global economy.

A “big challenge” may win the prize for understatement.

Bloomberg has a column on the implications of this massive demographic shift. Notice the data on the number of workers per retiree in various nations.

Rising dependency ratios — or the number of retirees per employed worker — provide one useful metric. In 1970, in the U.S., there were 5.3 workers for every retired person. By 2010 this had fallen to 4.5, and it’s expected to decline to 2.6 by 2050. In Germany, the number of workers per retiree will decrease to 1.6 in 2050, down from 4.1 in 1970. In Japan, the oldest society to have ever existed, the ratio will decrease to 1.2 in 2050, from 8.5 in 1970. Even as spending commitments grow, in other words, there will be fewer and fewer productive adults around to fund them.

The bottom line is that there are enormous unfunded liabilities.

Arnaud Mares of Morgan Stanley analyzed national solvency, or the difference between actual and potential government revenue, on one hand, and existing debt levels and future commitments on the other. The study found that by this measure the net worth of the U.S. was negative 800 percent of its GDP; that is, its future tax revenue was less than committed obligations by an amount equivalent to eight times the value of all goods and services America produces in a year. The net worth of European countries ranged from about negative 250 percent (Italy) to negative 1,800 percent (Greece). For Germany, France and the U.K., the approximate figures were negative 500 percent, negative 600 percent and negative 1,000 percent of GDP.

Wow, it’s depressing that the long-run outlook for the United States is worse than it is for some of Europe’s most infamous welfare states. Though I guess we shouldn’t be totally surprised since I’ve already shared similarly grim estimates from the IMF, BIS, and OECD.

I’ll close with some (sort of) good news.

Notwithstanding some of the estimates I’ve shared, America actually is in better shape than these other nations. If we enact genuine entitlement reform, ideally sooner rather than later, the long-run numbers dramatically improve because spending and debt no longer would be projected to rise so dramatically (whereas government already is an enormous burden in Europe).

This isn’t idle theory. Policymakers don’t have much control over demographics, but they can reduce the fiscal impact of demographic change by adopting better policy.

To cite the most prominent examples, jurisdictions such as Hong Kong and Singapore have very long lifespans and very low birthrates, yet their public finances don’t face nearly as much long-run pressure because they never made the mistake of setting up western-style welfare states.

The solution, therefore, is for America and other nations to copy these successful jurisdictions by replacing tax-and-transfer entitlements with systems based on private savings.

P.S. For what it’s worth, I’m not overflowing with optimism that we’ll get the reforms that are needed with Trump in the White House.

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The world’s best welfare state arguably is Finland.

Yes, the burden of government spending is enormous and the tax system is stifling, but the nation gets extremely high scores for rule of law and human liberty. Moreover, it is one of the world’s most laissez-faire economies when looking at areas other than fiscal policy.

Indeed, depending on who is doing the measuring, Finland ranks either slightly above or slightly below the United States when grading overall policy.

Yet even the best welfare state faces a grim future because of demographic change. Simply stated, redistribution programs only work if there is a sufficiently large supply of new taxpayers to finance promised handouts.

And that supply is running dry in Finland. Bloomberg reports that policymakers in that nation are waking up to the fact that there won’t be enough future taxpayers to finance the country’s extravagant welfare state.

Demographics are a concern across the developed world, of course. But they are particularly problematic for countries with a generous welfare state, since they endanger its long-term survival. …the Aktia Bank chief economist said in a telephone interview in Helsinki. “We have a large public sector and the system needs taxpayers in the future.” …According to the OECD, Finland already has the lowest ratio of youths to the working-age population in the Nordics. …And it also has the highest rate of old-age dependency in the region. …The situation is only likely to get worse, according to OECD projections.

Here are a couple of charts showing dramatic demographic changes in Nordic nations. The first chart shows the ratio of children to working-age adults.

And the second charts shows the population of old people (i.e., those most likely to receive money from the government) compared to the number of working-age adults.

As you can see, the numbers are grim now (green bar) but will get far worse by the middle of the century (the red and black bars) because the small number of children today translates into a small number of working-age adults in the future.

To be blunt, these numbers suggest that it’s just a matter of time before the fiscal crisis in Southern Europe spreads to Scandinavia.

Heck, it’s going to spread everywhere: Western Europe, Eastern Europe, Asia, the developing world, Japan and the United States.

Though it’s important to understand that demographic changes don’t necessarily trigger fiscal and economic problems. Hong Kong and Singapore have extremely low fertility rates, yet they don’t face big problems since they are not burdened by western-style welfare states.

By the way, the article also reveals that Finland’s government isn’t very effective at boosting birthrates, something that we already knew based on the failure of pro-natalist government schemes in nations such as Italy, Spain, Denmark, and Japan.

Though I’m amused that the reporter apparently thinks government handouts are a pro-parent policy and believes that more of the same will somehow have a positive effect.

Finland, a first-rate place in which to be a mother, has registered the lowest number of newborns in nearly 150 years. …the fertility rate should equal two per woman, Schauman says. It was projected at 1.57 in 2016, according to Statistics Finland. That’s a surprisingly low level, given the efforts made by the state to support parenthood. …Finland’s famous baby-boxes. Introduced in 1937, containers full of baby clothes and care products are delivered to expectant mothers, with the cardboard boxes doubling up as a makeshift cot. …Offering generous parental leave…doesn’t seem to be working either. …The government has been working with employers and trade unions to boost gender equality by making parental leave more flexible and the benefits system simpler.

Sigh, a bit of research would have shown that welfare states actually have a negative impact on fertility.

The bottom line is that entitlement reform is the only plausible way for Finland to solve this major economic threat.

P.S. Since the nation’s central bank has published research on the negative impact of excessive government spending, there are some Finns who understand what should be done.

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In a strange way, I admire Bernie Sanders. He openly embraces big government. Back during the 2016 campaign, I frequently observed that the difference between the Vermont Senator and Hillary Clinton is that he wanted America to become Greece at a much faster rate.

Well, he just installed a turbo-charged engine and stepped on the accelerator. He’s proposed a single-payer healthcare scheme that is being called “Medicare for all.”

According to Sanders and other advocates, the government’s health system is a good role model: People pay a tax while working and they get health care when they’re old. But there’s a not-so-slight problem with that approach. For every dollar that Medicare recipients paid to the program, taxpayers are financing three dollars of spending.

That approach is workable (though only in the short run) for Medicare. But it won’t work if government is paying for everyone’s health care.

So even Bernie admits that a tax increase will be necessary. And not just any tax hike. He’s proposing the biggest tax hike in the history of the United States. Heck, it’s the biggest tax hike in world history. Here are some of the frightening details, as reported by the Washington Post.

The Medicare for All legislation backed by Sen. Bernie Sanders (I-Vt.) and 16 Senate Democrats does not include details on how it might be paid for. …Sanders’s Senate office released a white paper on possible ways to pay for the legislation.

He starts with a giant payroll tax of 11.5 percent (on top of the 15.3 percent payroll tax that already exists).

The taxes themselves would fall on both employers and employees. Sanders floats the idea of a 7.5 percent tax on employers… Another tax, of 4 percent, would hit individuals.

To understand what this means, just contemplate the disastrous impact of Obamacare on the job market.

Sanders also has a big class-warfare tax hike.

The next big slice of funding: higher tax rates on the very wealthy. Income…$250,000…higher…would be hit harder, on an upward sliding scale, ending at a 52 percent tax on income over $10 million.

By the way, imposing a tax is the easy part. Collecting revenue will be a much harder task, especially since Sanders wants to take the very successful experiment of the 1980s and run it in reverse. He also wants a big levy on banks (foreign financial institutions are probably praying for that outcome), an extra layer of tax on American companies competing in world markets (foreign corporations are cheering for that one), along with a huge boost in the death tax and the imposition of a wealth tax (lawyers and accountants doubtlessly are licking their chops).

Sanders imagines a tax on financial institutions worth more than $50 billion, a one-time tax on offshore profits (an idea that is continually floated then sunk in tax reform negotiations), a higher estate tax (topping out at 55 percent), and a 1 percent wealth tax on the richest 0.1 percent of households.

That’s all the tax hikes listed in the Washington Post story, but Sanders also has some additional material on his office website.

A huge increase in the double taxation of dividends and capital gains (particularly when you consider that personal tax rates will be much higher.

…end the special tax break for capital gains and dividends on household income above $250,000, treating this income the same as income earned from working.

A restriction on itemized deductions.

…itemized deductions would be capped at 28 percent for households making over $250,000. In other words, for every dollar in tax deduction a high-income household could save at most 28 cents.

For what it’s worth, I don’t like the state and local tax deduction and the charitable deduction, and I also don’t like preferences for housing.

But I want to eliminate such distortions only if the revenue is used to finance lower tax rates, not to finance bigger government.

That being said, let’s get back to our list. Sanders has a special tax targeting small business.

…ensure that all business income of high-income people would be subject to the existing 3.8 percent tax to fund Medicare, either through the net investment income tax or the additional Medicare tax on earned income.

Last but not least, he wants to skim $112 billion over 10 years from corporations by manipulating accounting rules.

…eliminate the “last-in, first-out” (LIFO) accounting method.

The bottom line is that Sanders, in one fell swoop, would saddle America with a European-sized government. And that would mean European-level taxes. The only thing that’s missing is he didn’t propose a value-added tax.

Though I’m sure that would get added to the mix since the huge increase in the government’s fiscal burden would retard growth. And since that would mean sluggish revenue, politicians would seek another way to extract more money from the economy’s productive sector.

P.S. I’m a policy wonk rather than a political tactician, but my guess is that Bernie is misreading the mood of the American people. Yes, “free” healthcare sounds nice, but people get understandably scared when they get a price tag. This is why single-payer was repealed in Bernie’s home state. And it’s why Colorado voters rejected a similar scheme by a landslide margin.

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Most people understand that there’s a Social Security crisis, but they only know half the story.

The part of the crisis they grasp is that the program is basically bankrupt, though I doubt many of them realize that the long-run shortfall is a staggering $44 trillion.

The part of the crisis that generally is overlooked is that the program is a lousy deal for workers. They pay record amounts of tax into the system in exchange for a shaky promise of a modest monthly check. For all intents and purposes, they are being charged for a steak, but they’re getting a hamburger (with Medicare, by contrast, people are charged for a hamburger and they receive a hamburger but taxpayers pay for a steak that nobody gets).

For groups with lower-than-average life expectancy, such as poor people and minorities, Social Security is even worse. They pay into the system throughout their working lives, but then they don’t live long enough to collect a decent amount of benefits.

I narrated a video that was partly focused on how people could have more retirement income if we shifted to a system of personal retirement accounts, but this video from Learn Liberty directly addresses this issue.

By the way, I have one minor complaint with this excellent video. Social Security is not forced savings. There’s no money set aside. Yes, there’s a “trust fund,” but it contains nothing but IOUs. And if you don’t believe me, see what the Clinton Administration wrote back in 1999.

It would be more accurate to say the system is a pay-as-you-go, tax-and-transfer entitlement.

But I’m digressing, so let’s focus on some potential good news. Americans actually have a pretty good track record of saving for their own retirement. Indeed, total pension assets (measured as a share of economic output) in the United States rival those of nations that have mandatory private retirement systems.

So it presumably shouldn’t be that difficult to transition to a private retirement system in America.

Which was a key takeaway from a column in the Wall Street Journal last week by Andrew Biggs of the American Enterprise Institute. He starts with a pessimistic observation on how major politicians have addressed the crisis.

During last year’s presidential campaign, the candidates promised not to cut Social Security benefits (Donald Trump) and even to increase them (Hillary Clinton). …the Trump administration should reconsider its pledge not to cut Social Security benefits. The program is 25% underfunded over the long term, the Congressional Budget Office projects.

But the good news is that many Americans already are saving for retirement, so it wouldn’t be disruptive to extend personal retirement accounts to the entire population.

…private plans such as 401(k)s have allowed more people than ever to save for retirement…61% of workers… Contributions to private plans have…risen from an average 5.8% of wages in 1975 to 8% in 2014. …in 1984 only 23% of households received benefits from private retirement plans. By 2007 that had risen to 45%. Moreover, during the same period the benefits that the median household received from private plans rose by 141% above inflation, versus only 25% for Social Security benefits.

This is a system that should be expanded, with a prudent transition from a bankrupt Social Security system to a safer and more lucrative system of personal retirement accounts.

And that would be a much better outcome than what the current system will give us.

…Scandinavian-level tax rates or multi-trillion dollar unfunded entitlement liabilities.

P.S. Responding to those who worry about stock market downturns and the implications for retirement income, my colleague Mike Tanner showed that even people retiring after the 2008 crash would have been better off with personal retirement accounts.

P.P.S. You can enjoy some Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate grim humor.

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According to leftists like Bernie Sanders, European nations have wonderfully generous welfare states financed by high tax rates on the rich.

They’re partly right. There are very large welfare states in Europe (though I wouldn’t use “wonderfully” and “generous” to describe systems that have caused economic stagnation and high levels of unemployment).

But they’re wrong about how those welfare states are financed. Yes, tax rates on the rich are onerous, but not that much higher than in the United States. Instead, the big difference between America and Europe is that ordinary people pay much higher taxes on the other side of the Atlantic.

Indeed, I’ve previously cited Tax Foundation data showing that the United States arguably has the most “progressive” tax system in the developed world. Not because we tax the rich more, but simply because we impose comparatively modest burdens on everyone else.

And now we have some new evidence making the same point. Joseph Sternberg of the Wall Street Journal has some very sobering data on how the German tax system imposes a heavy weight on poor and middle-income taxpayers.

Europeans believe their tax codes are highly progressive, giving lower earners a break while levying significant proportions of the income of higher earners and corporations to fund generous social benefits. But that progressivity holds true only for direct taxes on personal and corporate income. Indirect taxes, such as the value-added tax on consumption and social-security taxes (disguised as “contributions”), are a different matter. The VAT disproportionately affects lower earners, who spend a higher proportion of their incomes. And social taxes tend to kick in at lower income levels than income taxes, and extract a higher and more uniform proportion of income. …if you look at the proportion of gross household income paid in all forms of tax, the rate varies by only 25 points. The lowest-earning 5% of households pay roughly 27% of their income in various taxes—mainly VAT—while a household in the 85th income percentile pays total taxes of around 52%, mostly in social-security taxes that amount to nearly double the income-tax bill.

Here’s a chart the WSJ included with the editorial.

As you can see, high payroll taxes and the value-added tax are a very costly combination.

And the rest of Europe is similar to Germany.

…Germany is not unique. The way German total revenues are split among income taxes, social taxes and the consumption tax is in line with the rest of Western Europe, as are its tax rates, according to OECD data. If other countries are more progressive than Germany, it’s only because Germany applies its second-highest marginal income-tax rate of 42% at a lower level of income than most.

Speaking of the OECD, here’s the bureaucracy’s data on the burden of government spending.

Germany is in the middle of the pack, with the public sector consuming 44 percent of economic output (Finland edges out France and Greece for the dubious honor of having the most expensive government).

The overall burden of the public sector is far too high in the United States, but we’re actually on the “low” side by OECD standards.

According to the data, total government spending “only” consumes 37.7 percent of America’s GDP. Only Ireland, Switzerland, and Latvia have better numbers (though my friend Constantin Gurdgiev explains we should be cautious about Irish economic data).

But I’m digressing. The point I want to emphasize is that punitive taxes on poor and middle-income taxpayers are unavoidable once politicians decide to impose a large welfare state.

Which is why I’m so inflexibly hostile to any tax increase, especially a value-added tax (or anything close to a VAT, such as the BAT) that would vacuum up huge amounts of money from the general population. Simply stated, politicians in Washington will have a hard time financing a bigger burden of government if they can only target the rich.

Sternberg makes the same point in his column.

Tax cuts have emerged as an issue ahead of Germany’s national election next month, with both major parties promising various timid tinkers… Not gonna happen. The VAT and social taxes are too important to the modern welfare state. The great lie is that there are a) enough “rich people,” b) who are rich enough, that c) taxing their incomes heavily enough can pay for generous health benefits and an old-age pension at 65. None of those propositions are true, and the third is especially wrong in an era of globally mobile capital and labor. That leaves the lower and middle classes, and taxes concealed in price tags or dolled up as “insurance contributions” to obscure exactly how much voters are paying for the privilege of their welfare states. …reform of the indirect taxes that impose such a drag on European economies awaits a more serious discussion about the proper role of the state overall.

Exactly.

There’s no feasible way to ease the burden on ordinary German taxpayers (or regular people in other European nations) unless there are sweeping reforms to reduce the welfare state.

And the moral of the story for Americans is that we better enact genuine entitlement reform if we don’t want to suffer the same fate.

P.S. If you don’t like German data, for whatever reason, I wrote last year about Belgium and made the same point about how a big welfare state necessarily means a bad tax system.

P.P.S. By the way, even the OECD admitted that European nations would grow faster if the burden of government was reduced.

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Since it is the single-largest government program, not only in the United States but also the entire world, it’s remarkable that Social Security isn’t getting much attention from fiscal policy wonks.

Sure, Obamacare is a more newsworthy issue because of the repeal/replace fight. And yes, it’s true that Medicare and Medicaid are growing faster and eventually will consume a larger share of the economy.

But those aren’t reasons to turn a blind eye toward a program that will soon have an annual budget of $1 trillion. Especially since the tax-and-spend crowd in Washington is actually arguing that the program should be expanded. I’m not kidding.

If nothing else, the just-released Trustees Report from the Social Security Administration demands attention. As I do every year, I immediately looked at Table VI.G9, which shows the annual inflation-adjusted budgetary impact of the program.

Here’s a chart showing how the program has grown since 1970 and what is expected in the future. Remember, these are inflation-adjusted numbers, so the sharp increase in outlays over the next several decades starkly illustrates that Social Security will be grabbing ever-larger amounts of money from the economy’s productive sector.

It’s also worth noting that the program already is in the red. Social Security outlays began to exceed revenues back in 2010.

And the numbers will get more out of balance over time.

By the way, some people say that the program is in decent shape since the “Trust Fund” isn’t projected to run out of money until 2034. That’s technically true, but utterly meaningless since it is nothing but a pile of IOUs.

You don’t have to believe me. A few years ago, I quoted this passage from one of Bill Clinton’s budgets.

These balances are available to finance future benefit payments and other trust fund expenditures–but only in a bookkeeping sense. …They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury, that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures.

Amen.

This is why annual cash flow into and out of the program is what matters, at least if we care about the Social Security’s economic impact.

And for those who want to know about the gap between the inflow and outflow, here’s a chart showing how deficits are going to explode in coming decades. Again, keep in mind these are inflation-adjusted numbers.

That’s not a typo in the chart. The total shortfall between now and 2095 is a staggering $44.2 trillion. Yes, trillion.

Remarkably, there’s an even bigger long-run problem with Medicare and Medicaid. Which helps to explain I relentlessly push for genuine entitlement reform.

But let’s focus today on Social Security. The answer to this looming fiscal nightmare is to copy one of the many nations that have shifted to “funded” retirement systems based on real savings. I’m a big fan of the Australian approach. Chile also has a great system, and Switzerland and the Netherlands are good role models as well. Hong Kong and Singapore also rely on private savings for retirement, and both jurisdictions demonstrate that aging populations and falling birthrates aren’t necessarily a fiscal death sentence. Heck, even the Faroe Islands and Sweden have jumped on the bandwagon of private retirement accounts.

P.P.S. You can enjoy some Social Security cartoons here, here, and here. And we also have a Social Security joke if you appreciate grim humor.

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