Monday, March 26, 2012
Social Security and Socialized Health Care
Social Security is a popular debate topic in recent
times. To further explore the issues currently being raised about the
government program, I read several articles in The Economist and chose to use
two of them in my discussion: Pensions:
The challenge of getting Americans to save more
and America's
safety net, part two: Taking Social Security and feeling you've earned it (Throughout this blog post I will refer to
the former as “Pensions” and the latter as “Safety Net”). There are several
similarities between the two articles, as well as, the discussion we had in
Economics of the Public Sector, regarding alternative approaches to a
government-implemented retirement plan that would better suit the needs of
retirees.
While both articles are incorrect in defining Social
Security as an insurance program (understandable considering it is the
definition the government has given Social Security) both also mention an
alternative to Social Security that looks more like a government-required
investment program; essentially, a pension plan. While I do not believe there
is any source of market failure associated with any individual’s retirement
savings—no externalities, no monopoly power, no public goods—and thus, no
justification for government to have any type of Social Security program in the
first place, if one is going to exist, it would be more constitutional to have
a program in which each individual gets returned what he/she puts in, instead
of the system of Social Security we currently have in place, which is basically
an intergenerational exchange of debt—each generation pays for the preceding
generation’s Social Security payout. The “Pensions” article lays out a more
detailed description of the proposed pension plan: Every working citizen has 5%
of his/her wages deducted and invested into one or more of their choice of
pooled accounts, which contain both foreign and domestic assets. In addition, a
subsidy would be provided for people earning too little income to contribute to
the pension plan. Coupling this retirement plan with a progressive consumption
tax would increase the incentive for individuals to save and, at least,
significantly reduce (if not eliminate) the number of retirees living on
welfare.
The “Safety Net” article also discusses Medicare and
other medical insurance. The author argues in favor of a universal health care
system. The argument is something that has torn me in the debate since
ObamaCare was “introduced”. Not that I necessarily agree with the type of
universal health care system this plan represents, but I do think there is a
serious problem when the medical costs incurred by individuals who cannot afford
them become the burden of the general population of tax payers. There is also
the issue associated with how this debt can negatively affect major medical
centers, which is something we have recently faced in Colorado Springs.
Personally, I think if health insurance is going to be made mandatory, a
two-tiered health care insurance system may be the best way to solve many of
the problems we currently deal with. People who wish to remain purchasing their
own private health insurance are free to do so and those who wish to
participate in a socialized health care system pay higher income taxes to
support the insurance “fund”.
There is also the argument that government simply
does not have the right to force people to buy insurance. Again, I do not
necessarily disagree, however, liability auto insurance is a requirement for
every driver in the United States. The idea is simply to be able to cover
damages an individual may cause to someone
else and/or someone else’s property.
The same argument can be said for requiring every person to have health care
coverage—without it, the costs incurred for an individual’s medical treatment
may become the burden of the general population.
Again, and this point cannot be stressed enough,
neither a government-required pension plan or mandatory health care represent situations
that fit the definition of a circumstance that justifies government
intervention. There are no externalities here. There is not a monopoly power at
play. There are no public goods in either scenario. It is simply too easy to
argue that government does not have the right to force people to participate in
either a pension plan or health care insurance program. I do still wonder,
however, if government mandating that each person purchase health insurance (using
the two-tiered system discussed above) may alleviate the problems associated
with providing medical care to people who cannot pay for it themselves. This
idea goes completely against my capitalist nature, it just seems as if having
the burden of debt from unpaid medical costs dispersed throughout a population is
socialist in itself. There is, of course, always the alternative approach of
simply not providing health care to those who cannot afford it, yet, this idea
tends to be thought of as “morally wrong” among much of the population, even
though it is the most logical way of providing services in a capitalist nation.
Comments:
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I would like to suggest that we should not think of government as having "the right" to do anything. Instead of asking if government has a right to impose a health insurance mandate, I think the proper way to put the question is something like the following: "Does the Constitution include the grant of POWER to Congress to impose a health insurance mandate?"
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