How to Constrain Entitlement Spending

For those who don't see how we can possibly avert the Social Security/Medicare train wreck without raising taxes, here's a quick primer on how budgeting works for everyone who isn't the government:

1. Figure out how much money you can spend.
2. Take the figure from line 1 and allocate it according to your priorities.

And you know what? It works for government programs, too! Take Medicare*. It's funded by a 2.9% payroll tax. So Medicare's budget for any given year will be whatever amount of money is raised by that tax. Now all that's left to do is allocate it according to your priorities. To keep spending under the limit, you can raise the age of eligibility, cut back coverage of treatments with high cost/benefit ratios, increase copays, limit coverage to generic drugs, outsource expensive procedures, or any combination of the above**. Anything goes, as long as you stay within the budget.

Same deal with Social Security. It's funded by a 12.4% tax on wages up to $100k or so--index the cap to the 90th wage percentile (or whatever), and you can keep it going until the end of time. Just don't jack up the monthly checks too high, or if you do, increase the retirement age to compensate. It's as easy as that.

* Please!

** Note that this is not likely to reduce quality of care available. The main problems with Medicare are that life expectancy is increasing, meaning that a greater percentage of the population is eligible, and new, expensive treatments are becoming available. The changes necessary to keep spending within budget should only slow the rate at which coverage improves.

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Assume you do this and the

Assume you do this and the next day half the population is in the streets, the school are shut down, cars are burning? Then what?

(Just a hypothetical question really)

Old people don't riot. But

Old people don't riot. But there's a difference between economic infeasibility and political unpalatability. A lot of people seem to be assuming the former.