Brett Allens
When it comes to Medicare and Social Security, we get most of what we put in.
Big government keeps getting more expensive because more people live longer.
When the program was first set up, heart transplants didn’t exist, so they didn’t cost Medicare a cent. you just died
Do the same for every other medical procedure you can think of that has been invented or developed in the last 50 years. You should be able to get some good old fashioned “ear trumpets” cheap on eBay. Just like they used to in the good old days.
All of this explains why Social Security and Medicare, which absorbed just 15% of the federal budget under LBJ, now account for one-third of that and will soon reach two-fifths. (All numbers can be found on the Federal Office of Management and Budget website.) In fact, the two accounted for 38% of federal spending in 2019, but Covid came along and made up all spending. I blew the numbers to pieces.
Why is this important? Because politicians are now hustling in Washington over federal taxes, federal spending, the debt ceiling, Social Security, and Medicare.
There are good arguments on both sides about taxes and general spending. I don’t care how liberal or “progressive” you are. Anyone who interacted with the federal government and he for 10 minutes can identify waste and cost savings. They are as obvious as the nose on your face.
(Passport renewal? It takes 3 months. Don’t start.)
But when it comes to Medicare and Social Security, we’re getting most of what we put in. Social Security is money in and money out. And while Medicare logically should have more room for flexibility and perhaps savings, on the whole, money is funding the healthcare system.
Anyway, it’s not the budget buster we think of. Medicare makes up 13% of the federal budget this year. In 1997 it was 12%.
So anyone who talks about cutting will have to talk about what they actually want to cut.Waving in the air, talking vaguely about waste and greed, and the mysterious nameless “other” people. . “Will Grandpa get his monthly check? Can he get a heart transplant? Simple question.
This leads to a new report dropped on my desk on global pension plans around the world, compiled by German insurance giant Allianz. Nearly every country in the world is grappling with the same issues as us. More elderly people, more better health care options.
According to Allianz figures, maybe we shouldn’t complain too much. Overall, the US pension system is he fifth best in the world. At least, taking into account things like fiscal sustainability and generous benefits.
Yet we pay at the lowest contribution rate of anyone. According to Allianz calculations, US contributions are equivalent to about 10% of total wages nationwide.
If you can imagine, Singapore is over 35%. Italy, Brazil, Spain, Great Britain, rioting France, China, India, Norway, Switzerland and many other countries pay more than 20% of her. And only a few developed countries pay less, especially South Korea and New Zealand in the single digits.
Things to think about the next time someone asks you whether you should raise payroll taxes or cut Social Security or Medicare.
Our FICA tax is just over 15% of our wages, but our contribution is only about 10% of our income. This is because there are many forms of “income” such as capital gains, dividends, coupons, and wages above the $160,000 threshold. largely or completely exempt.
Meanwhile, in Denmark, home to the mermaid Nikolai Coster-Waldau, the mystical concept of “hyggelig”, the happiest people in the world (allegedly), and the world’s best retirement system, there are many. I congratulate you.
So, at least, Allianz’s analysis says.
The Danes lead the field by a clear margin, followed by the Dutch, the Swedes, the Kiwis and us Americans.
Again, Danes pay the highest taxes in the world. According to the IMF, general government revenues account for over 50% of annual gross domestic product. About 33% in the US.
Want to cut your taxes in half? I bet you don’t. On the other hand, you may prefer to increase your premium rate from the current very low premium rate rather than cut your payments.
– Brett Allens
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04-22-23 1042ET
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