On paper, you can save money with “means testing” of benefits, but that creates an indirect penalty on work, saving, and investment.
You can also, on paper, save money by imposing price controls on health care, but that policy has a long track record of failure.
At the risk of understatement, either of those approaches represents “the wrong kind” of entitlement reform. Indeed, those policies are not really reform. Instead, they are tinkering with systems that are fundamentally broken.
For what it is worth, most politicians do not support good reform or bad reform.
As predicted by “public choice,” their preferred approach is kicking the can down the road.
Which is what Greek politicians did for many years.
But they learned in Greece that ignoring a problem does not make it disappear. Instead, it is a recipe for fiscal crisis (and we will probably have to re-learn that lesson in Italy).
So my other goal today is to show why something needs to be done.
. . .
Having shared all this depressing data, I’ll now close with a couple of observations.
First, doing nothing almost surely guarantees massive future tax increases. Including European-style levies like a value-added tax that will be very bad news for lower- income and middle-class taxpayers.
Second, “funded liabilities” are hardly an improvement over “unfunded liabilities” since that simply means debt-financed spending becomes tax-financed spending. From the frying pan to the fire, or vice-versa.As I said in the above video, we need the right kind of entitlement reform so that we save money and have better policy for old people and poor people.
Random stuff I find interesting and you may not.
