Saturday, April 10, 2004

I'm Old! Gimme gimme gimme!

A very prolific blogger named Betsy Newmark posted this story about her high school students:

Last week, I took my AP Government students to the computer lab to let them play around with a federal budget simulator to see if they could balance the budget. It was fun to see how a bunch of teenagers, most of them 15 or 16 years old, would balance the budget. They were ruthless. The liberal kids happily cut away at military spending, NASA, and foreign aid. They were then dismayed to find that they hadn't cut very much of the deficit. The conservative kids whittled away at social welfare and increased the tax cuts. They too were unable to make substantial headway on the deficit. However, the cut that both the liberals and conservatives agreed on was whacking away at Social Security and Medicare. Cries of "throw Granny off welfare" and "buy your own drugs" were heard. They were ruthless. Some of them reduced Social Security down to zero, cackling cheerfully all the while.

My conclusion is that, if younger voters had more pull in Congress, we could get some serious reform of Social Security and Medicare accomplished. Unfortunately, they'll never equal the strength of AARP.

I think young people, if anything, tend to be too cynical about social security. The fact is, the system could be made sustainable with relatively minor adjustments. (Medicare is a much bigger problem). Unfortunately this cynicism often becomes apathy, and Ms. Newmark is probably right that the young won't be challenging AARP anytime soon.

If I could do one simple thing to combat apathy about these programs it would be this: I would require that the entire social security and Medicaid taxes appear on paychecks. As it stands, we only show the "employee share," while the equally large "employer share" may go unnoticed by the average person. I think most people really believe the fiction that the employer is "paying" the employer share. Of course, he is no more paying the "employer share" than he is paying the "employee share;" in fact, he probably writes a single check to the government for both amounts. Who is really paying is a question of tax incidence, and economic theory suggests it probably falls mostly on the employee. The only change I'm proposing is that we add the "employer share" back onto the employee's pay, and then show it being deducted away in taxes. I bet this would get some reform juices flowing. (I'm sure the self-employed are on board already.)

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