Choices, Choices...... and Dilemnas

I was talking this week with a young woman I know who is a political neophyte.  She knows she is a Conservative, as her father is conservative and she senses he is right about stuff, but she's just contemplating getting more educated and figuring out why she feels the way she does (I hope that doesn't seem mocking at all, because it's not intended to be- we all start someplace politically, for no better reasons than what she has). 

Anyway, we were talking about entitlements, and she talked about how we "can't afford" the Social Security and Medicare benefits that we are promising right now.  This got me to thinking again about the different categories of government spending; there are some things that governments legitimately can't afford, and there are other things that governments and societies decide not to pay for.  And there's a difference between those two.

Greece, for example, is screwed.  They mismanaged their debt so badly, along with a dash of fraud to keep creditors coming a few years too long, and now they're in a hole so deep and wide that there's just no way out.  They can't keep spending what they were spending.  They have to raise much more in taxes than they have been raising.  And the austerity measures needed to get the budget in line are so crushing that they're destroying the entire economy in the country and pushing unemployment to record levels.  They're in a vicious circle in which further austerity just makes the economy worse, which in turn depresses tax receipts and continues the cycle further.  And they're so far in the hole that even Keynesian deficits are totally unsustainable because creditors (rightly) won't fund the deficits.  There's no way out it seems, except for Germany and others to just give them money.  This is an example of stuff "we can't afford".

Back home, on the other hand, we have a looming Medicare and Medicaid crisis.  Health care costs are rising much faster than inflation, and there seems no end in sight to this.  Overall health care spending as a percentage of GDP is rising.  Something has to change.  This is a really hard problem to solve, in that we can raise Medicare and other taxes in the short term, but in the longer term we just have to find a way to stop the explosion of health care costs.  ObamaCare has a commission that is tasked with doing that, though it's hard to predict whether that will work.  Conservatives want to do it by unleashing the free market, but Liberals point out that health care is already a free market in the US, one that seems to work differently from, say, the auto market. (Picture you're going for a knee replacement, and you get a marketing call from another hospital offering to do the same surgery for 25% less money.  Would you do it?  Most people wouldn't take those sorts of risks when it comes to their health, so they trust doctors to decide- it just doesn't work the same).  So this crisis is really hard to solve, but not impossible.

Then you have the problems that are easy to solve- we just have to decide how to do it.  Social Security is my favorite example.  Baby Boomers are retiring, the population is getting older, the ratio of workers to retirees is getting worse, and the math no longer works for making Social Security solvent in the long term.  This isn't because of bad government or poor administration- it's just demographics.  But the good news is that we have a huge buffet full of possible solutions!  We can:

1. Cut benefits to retirees by a modest amount
2. Raise SS taxes in all our paychecks
3. Raise the ceiling so that rich people pay more SS taxes while leaving the rest of us unchanged
4. Increase the retirement age
5. Make SS means-tested so rich people don't get benefits
6. Some combination of any of these

There are probably more solutions I haven't thought of too.  And I hate some of these solutions (4, 5) and would fight hard against them.  But Social Security fits clearly in the category of stuff that has a solution.  We just have to pick one of the plans and implement it.